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FHA Loan

What is an FHA loan?

An FHA Loan is a mortgage loan insured by the Federal Housing Administration (FHA). The FHA does not provide the loan; rather, it insures the loan for the lender. If the borrower defaults, the lender can seek recourse from the FHA. This lowers the lender’s risk and makes them more likely to issue a loan.

The FHA was formed in 1934, and joined the Department of Housing and Urban Development in 1965. The organization has insured more than 33 million home mortgages since its inception. Today it continues to help low- and middle-income families move into their dream homes, by making it easier to obtain mortgages. More than 800,000 current homeowners have mortgages insured by the FHA.

 What are the FHA loan requirements ?

  • Your monthly income and your current monthly expenses. Standard FHA loan requirement debt-to-income ratios are 31/45. These ratios may be exceeded with compensating factors.
  • Your credit history (standard FHA loan requirements for credit score are more flexible than other programs). A 620 FICO credit score is often required to obtain an FHA approval.
  • To determine if the home meets FHA requirements for loan approval, an appraisal must be performed by a certified FHA appraiser. Only the lending institution may initiate the order for an appraisal to determine that the subject property meets FHA loan inspection requirements.

 What are the FHA loan Down Payment requirements?

The minimum down payment required is 3.5 % of the sale price. The down payment can be a financial gift from a family member.

What will my interest be?

FHA interest rates are generally lower than conventional interest rates. Lower credit scores may have a negative impact on your interest rate.

What types of properties are eligible ?

1-4 unit primary residences, Planned Urban Developments (PUDs), Approved Condos, Double-wide manufactured homes, and Modular or pre-cut housing are all considered to be eligible.

What is the maximum loan amount for FHA loans?

Each county varies. Flagler county is $ 271,050.00

What kinds of loans do FHA programs offer ?

Fixed rate loans – Most FHA loans are fixed-rate mortgages. In a fixed rate mortgage, your interest rate stays the same during the whole loan period, normally 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your monthly payment will be, and you can plan for it.

Adjustable rate loans – Most first-time home buyers are a little stretched financially, so they want payments as low as possible at the beginning. With FHAs adjustable rate mortgage (ARM), the initial interest rate and monthly payments are low, but these may change during the life of the loan. FHA uses the 1-Year Constant Maturity Treasury Index (1 Yr CMT) the most widely used index, to calculate the changes in interest rates. An index is a measure of interest rate changes that determine how much the interest rate on an ARM will change over time.

The maximum amount that the interest rate on your loan may increase or decrease in any one year is 1 or 2 percentage points, depending upon the type of ARM you choose. Over the life of the loan, the maximum interest rate change is 5 or 6 percentage points from the initial rate, again depending upon the type of ARM you choose. The advantage of an ARM is that you may be able to afford more house because your initial interest rate will be lower, as will your payment.

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