FHA Loans

FHA loans have been helping people become homeowners since 1934. Some benefits of FHA loans are:

• Low down payments (as little as 3.5% of the purchase price)
• Low closing costs (closing costs can be financed or seller can pay up to 6% of the purchase price to cover closing costs)
• Easy credit qualifying (credit scores as low as 620)

What does FHA have for you?
Buying your first home?
FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs can be included in the loan. FHA loans tend to be more lenient in areas of credit history, employment history, assets to close, and you can have a non-occupant co-borrower co-sign on single family owner occupied property.  FHA financing with 3.5% down payments are available on 1-4 family owner occupied  properties.
Want a fixer-upper?
FHA has a loan (FHA 203K) that allows you to buy a home, fix it up, and include all the costs in one loan. Or, if you own a home that you want to re-model or repair, you can refinance what you owe and add the cost of repairs - all in one loan.
Financial help for seniors
Are you 62 or older? Do you live in your home? Do you own it outright or have a low loan balance? If you can answer "yes" to all of these questions, then the FHA Reverse Mortgage might be right for you. It lets you convert a portion of your equity into cash.
Want to make your home more energy efficient?
You can include the costs of energy improvements into an FHA Energy-Efficient Mortgage.

FHA mortgages are home loans that are insured by the Federal Government. This insurance protects the lender from losses suffered if the home goes into foreclosure. It is not the same as hazard insurance or insurances that pay in the event the borrower dies or becomes disabled.

FHA allows a buyer to purchase a home with as little as 3.5% down payment. The down payment can come in the form of a gift from a relative or money borrowed from your documented retirement assets.  They tend to be more lenient on areas such as credit, funds to close and co-borrowers.

Most loans use a method of analyzing credit called credit scoring in the underwriting process. Studies have demonstrated a direct relationship between low credit scores and higher mortgage delinquency rates. As a result many lenders have established minimum credit scores at which they will accept loans. Unfortunately, a lack of credit, old delinquencies or incorrect information on the credit report can cause a low credit score. FHA does not have specific credit score requirements (most lenders do require a 620 Minimum Credit Score). Although a high credit score may assist in getting the mortgage approved, a low score is not automatically cause for denial. If the credit scores are low, then it is up to the borrower to demonstrate his/her ability and willingness to pay the loan back. This allows the borrower to explain the circumstances surrounding the credit difficulties and have that explanation considered in the underwriting process.

The underwriter on an FHA loan will review the credit and payment history of a customer concentrating on the most recent 12 to 24 months. If the customer has had a good payment record over the past 12 to 24 months they can often get approved for a mortgage even when Conventional financing has turned them down. An experienced loan officer can help the customer clearly tell their story and will often make suggestions as to how to make the file more acceptable to FHA. Because of FHA's leniency, some borrowers with past credit problems elect to use FHA for loans when they have a substantial down payment rather than getting a higher interest rate conventional loan. FHA tends to be more flexible than Conventional financing in the money needed to purchase the home.

The interest rate that you select will also have a bearing on the total costs. If you select a lower rate so that you can reduce your payment, you may end up paying additional money towards "points". At the same time if you are comfortable with a slightly higher payment you may find a lender that is willing to reduce the costs to close in favor of a higher interest rate.

FHA allows the borrower to get the funds necessary to close from several sources. They include such areas as personal savings, gifts, grants, loans from retirement accounts and seller contributions of up to 6% of the purchase price to cover closing costs, pre-paid interest, taxes and insurance as well as establishing an escrow account for future taxes and insurances.