FHA loans differ from typical loans in that they are insured by the Federal Housing Administration, which is a part of the Department of Housing and Urban Development (HUD). Because this insurance reduces the lender’s risk on the loan, lenders have greater flexibility with regard to approving loans. For example, FHA loans are not as restrictive with minimum credit scores so a client may be able to obtain a loan despite having had credit problems or even a bankruptcy in the past. Alternatively, if a consumer does not have a significant traditional credit history, it may still be possible to obtain financing by documenting payment histories on items such as rent and utilities. Individual policies by lender may vary so ask your mortgage consultant for additional clarification.

FHA loans require a downpayment of as little as 3.5% of the purchase price. The downpayment may be obtained as a gift from a family member or through a downpayment assistance program. FHA loans are processed just like any other loan, and they provide a wonderful opportunity for consumers who are seeking to achieve home ownership!

Understanding what you’ll be responsible for paying for in cash is good information to have before you even submit a mortgage application. The specific costs can vary depending upon the state that you live in, the cost of your home and to other factors, but here are some basic things to consider that should be considered.

Down Payment Required for a Mortgage

In order to qualify for a mortgage, you will likely have to produce a down payment. The specific amount required for a down payment depends upon state guidelines as well as the type of loan. FHA mortgage loans offer the competitive down payment options for those who qualify, requiring under 3.5% of the purchase price down.

Mortgage Closing Costs

In addition to requiring money for your mortgage down payment, you’ll need to save money for closing costs. This is something that you may be able to get paid by the seller of your new home, but as this is not something that is guaranteed, it is wise to have some money on hand to pay for all of the costs of purchasing a home that cannot be rolled into your mortgage. If you present a mortgage lender an offer that does not include closing costs covered by the seller, often as a first time home buyer, you are required to prove that you have the money to cover them. Depending on your local market environment and location, 3% to 6% of the purchase price may be a fair estimate for your closing costs, and somewhere in this range is what a mortgage lender will typically need to confirm.

Target Purchase Price and Other Considerations

Since the location, cost and your unique financial and credit attributes can affect what you will need to put down when you purchase a home, we can help you better understand the estimated amount that you’ll need to pay when buying a home. More importantly,  we can help you understand and target the home purchase price that suits your specific needs an finances so you can be prepared in advance to make your first home purchase!

Congresswoman Maxine Waters (D-CA), Chairwoman of the Housing and Community Opportunity Subcommittee, said yesterday she drafted the bill in response to recent events that caused FHA’s reserves to fall below the two percent level required in law. This is the same woman that suggested that we keep rates low. Doesn’t she understand that by increasing MI premiums .50% is the equivalent of 2 percentage points? This is absurd!

According to a statement from the committee, the Act will empower FHA to improve its financial position by allowing the agency to adjust its premium structure for new borrowers, while still providing affordable mortgage insurance to the individuals FHA is intended to serve including low-income and minority borrowers and individuals in traditionally underserved areas

“The economic crisis that started a couple of years ago and declining home prices have caused FHA’s capital reserves to deteriorate in recent months, but under the leadership of Secretary Shaun Donovan and FHA Commissioner David Stevens, FHA has taken unprecedented administrative and regulatory steps to improve risk management and root out bad actors participating in the program,” Congresswoman Waters said. “This legislation makes essential reforms to strengthen FHA’s finances.”

H.R. 5072 creates a new Deputy Assistant Secretary at FHA for Risk Management and Regulatory Affairs and provides the agency with enhanced authority to terminate lenders’ approval to originate or underwrite loans backed by FHA insurance when it finds evidence of fraud or noncompliance.

In addition, the bill requires FHA to improve its internal reporting systems to better manage risk and to provide transparent data to the public and to Congress. This includes improving monitoring of early defaults and claims, tracking mortgage information by loan servicer, and providing FHA with the ability to contract out for additional credit risk analysis.

The bill still needs approval by the full House and the senate before it’s signed into law. A Senate Version has not yet been introduced.

Write your congress and stop this bill now!

With the resurgence of FHA home loans, many home owners are wondering if they can benefit from an FHA loan. The truth is that you may or may not benefit by converting your existing loan into an FHA loan when you refinance.

Some of the factors that can determine if an FHA loan is right for you:

• Loan To Value
• Home Value
• Size of Existing Loan
• Credit Score
• Amount of Cash You Want to Take Out

With the many changes that have occurred with FHA loans, it is possible that even if you didn’t qualify six months ago, there may be a loan program that is right for you.

One of our mortgage professionals can help you determine if an FHA loan is right for you quickly with no costs.