FHA Loans

FHA Loans

What are the Advantages of an FHA Loan?

John Thomas November 24, 2007

FHA loans are not credit-score driven. Although many wholesale lenders have minimum credit scores, many do not. They traditionally underwrite the file, according to FHA guidelines. If you have no credit or no good tradelines, then FHA loans also allow you to use alternative credit. Monthly obligations like gas, electric, and cell phone bills wherever money is going on a monthly basis as long as you can document it, it’s possible to essentially build a credit history for loan applicants.

Another feature of FHA loans is that all funds can come from a gift, either from a family member, through the seller, or from a down-payment assistance program. Moreover, it’s permissible to have a six percent seller contribution on top of the gift funds which can go towards paying all of the closing costs. FHA Loans also offer market interest rates with no mark up for the high LTV that comes with other high LTV programs. FHA loans can be used for purchasing a home or refinancing a home. If you can even use an FHA loan for a cash-out refinance, but the maximum LTV is 95%. Keep Reading...

History of FHA

John Thomas September 6, 2007

Congress created the Federal Housing Administration in 1934. At this time, nearly two million construction workers were laid off. Only four out of ten people owned their own home. In addition, mortgage loan terms were outrageous. Borrowers had to put 50 percent down, and the note ballooned in 3 to 5 years. So the mission of the FHA was to encourage home ownership.

The FHA became a part of HUD, which is the Department of Housing and Urban Development, in the year 1965. In the mid-1980’s, the FHA transitioned to what we call direct endorsement and began approving lenders to underwrite and close their own loans. Prior to this time, the FHA did have a hand in the process of the loan. Keep Reading...

President Bush annouces FHA secured loan that will bail out Delaware Home Owners

John Thomas September 5, 2007

On August 31, President Bush announced that HUD will help families avoid Foreclosure by providing a brand new FHA loan called the FHA Secured loan.  This loan will directly impact Delaware Home Owners facing foreclosure.  Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing.

FHA will implement risk-based premiums that match the borrower’s credit profile with the insurance premium they pay.  This means riskier borrowers pay more for their insurance. This common-sense, risk-based pricing structure will begin on January 1, 2008.  This is what happens when a person receives private mortgage insurance with non-FHA loans. Keep Reading...

FHA Loans – Mortgage Insurance

John Thomas July 26, 2007 Tags: ,

FHA Loans – FHA Mortgage Insurance

FHA does not fund home loans directly; rather, it provides a guarantee to the mortgage lender against default. There are two separate fees that HUD collects to provide a level of guarantee coverage to the lender:

  1. Up-front mortgage insurance premiums (UFMIP).
  2. Monthly renewal mortgage insurance (Monthly MI).

The up-front mortgage insurance premium, if required, will be 1.75% of the base loan amount. This can be added directly on top of the base loan amount to determine the total loan amount, regardless of initial loan amount or appraised value. MI can always be added to the maximum base mortgage amount.

Monthly mortgage insurance premiums for home loans closed after January 1, 2001, are refundable through the 5th year of the loan based on certain percentage increments. For example, if a borrower sells or refinances after having the property or the loan for 36 months, the borrower is entitled to a partial refund of the original FHA up-front mortgage insurance premiums.
The annual renewal premium, also referred to as the mutual mortgage insurance premium in the HUD mortgage insurance premium policy, is 0.85% per year divided by 12. This is included in the borrower’s monthly payment. Keep Reading...