FHA DOCUMENTATION
With an FHA loan, you will generally be asked for documentation to support your income, liabilities, and funds to close. This documentation will establish your ability to repay the FHA home loan.
FHA FAQ
Is FHA financing complicated?
FHA home loans are easier than conventional financing.
Who qualifies for a FHA home loan?
The program is open to virtually everyone. There are a few restrictions placed upon credit and residency that may preclude someone from obtaining a FHA home loan.
Is it true that the down payment can be gifted?
Yes. Current FHA guidelines permit a relative, a governmental agency, or approved non-profit organization to gift the borrower's down payment. A gift, according to HUD, is just that--a gift. HUD does not permit the borrower to repay the gift as a stipulation of giving the gift.
What is the minimum amount of money I need to buy a home with a FHA mortgage?
The Federal Housing Act requires the minimum cash investment to be 3 percent of the sales price. Even though the actual down payment may be less than 3 percent, the balance would go towards the borrower's closing costs. In the event that there are no closing costs, the down payment would be increased to 3 percent.
I am in a Chapter 13 bankruptcy. Can I get a FHA loan?
A Chapter 13 bankruptcy does not automatically prohibit a borrower from obtaining a FHA loan. Ideally, a minimum of 12 months of repayment with a Chapter 13 (the borrower must also seek permission of the courts to allow this). If a borrower has suffered through extenuating circumstances (such as surviving
cancer but had to declare bankruptcy because the medical bills), special exceptions can sometimes be made.
What is the FHA (Federal Housing Administration)?
The Federal Housing Administration, generally known as "FHA", provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring nearly 33 million properties since its inception in 1934.
What is FHA Mortgage Insurance?
FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner's default. Loans must meet certain requirements established by FHA to qualify for insurance.
Why does FHA Mortgage Insurance exist?
Unlike conventional loans that adhere to strict underwriting guidelines, FHA-insured loans require very little cash investment to close a loan. There is more flexibility in calculating household income and payment ratios. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property -whichever is longer.
How is FHA funded?
FHA is the only government agency that operates entirely from its self-generated income and costs the taxpayers nothing. The proceeds from the mortgage insurance paid by the homeowners are captured in an account that is used to operate the program entirely. FHA provides a huge economic stimulation to the country in the form of home and community development, which trickles down to local communities in the form of jobs, building suppliers, tax bases, schools, and other forms of revenue.
The History of FHA
Congress created the Federal Housing Administration (FHA) in 1934. The FHA became a part of the Department of Housing and Urban Development's (HUD) Office of Housing in 1965.
What is the most popular FHA loan program?
The most popular FHA home loan program for a first time home buyer is by far is the 203(b). This is your standard fixed rate loan for 1-4 family owner occupied houses and only requires a minimum of 3% from the borrower. This loan also permits 100% of their money needed to close can be financed in the loan with a Seller’s Concession, a gift from a relative, non-profit organization or government agency.
What are the advantages of an FHA home loan?
The main advantage to a FHA home loan is that the credit criteria for a first time borrower are not as strict as Conventional Loans sold to Fannie Mae (FNMA) or Freddie Mac (FHLMC). Someone who may have had a few credit problems or no traditional credit should not have a problem obtaining FHA financing.
In addition borrower's allowable costs can be wrapped into the loan.
The monthly mortgage insurance premium is cheaper for an FHA loan verses a conventional loan with 3% down. FHA loans may require less income to qualify as they will exceed the Conventional debt ratios of 28/36% as their standard is 29/41%
Are there any disadvantages to FHA loans?
Some contend that the 1.50% FHA upfront mortgage insurance premium (MIP) is a disadvantage. However this amount makes just a very small increase in the borrower's month payment and is partially refundable when the loan is paid off in the first 3 years. FHA does not make home loans. They insure the loans that we can assist you in getting.
Are FHA loans for first time homebuyers only?
Many people make the mistake and assume that FHA loans are only available for first time home buyers. This is not true. FHA loans are available to anyone, whether it is the first or fifth home and can be used to purchase a home or refinance a home. If refinancing a home the current loan DOES NOT have to be an FHA loan.
You can use FHA home loans as many times as you desire when buying a home or doing a mortgage refinance. The only guideline is that you cannot have more than one outstanding FHA mortgage loan with a loan to value of higher than 75%. You can own rental property and purchase your primary residence using FHA mortgage financing.
Does FHA use a FICO credit score for loan qualifying?
FHA programs that do require a FICO credit score with borrowers who have established mainstream credit. Those who have not established credit that is submitted to the Credit Bureaus and thereby have no scores may have their
loans manually underwritten whereby common sense is used.
Can I buy a home with no down payment and get 100% financing using a FHA loan?
Yes. Using a FHA insured real estate first mortgage in combination with a Grant or Gift from a relative, you are able to buy a home with no money down.
How long after a bankruptcy can I use a FHA loans for buying a home or mortgage refinance?
You may buy a home using FHA loans 24 months after the date of discharge for a bankruptcy, assuming that you have maintained perfect credit since the discharge of the bankruptcy.
How long after a Foreclosure can I use a FHA mortgage loan for buying a home or a refinance mortgage?
FHA loans may be used for buying a home 24 months after the final date of foreclosure assuming that your credit since the foreclosure has been perfect.
What the most common FHA loans?
There are several notable FHA home loan programs available as listed below.
Standard fixed rate (FHA 203b)
Rehab Loan (FHA 203k)
Condominium Loans (FHA 234c)
Can I buy a 4 Unit Home with FHA loan financing?
Yes, you may use a FHA mortgage for buying 1,2,3, or 4 unit home assuming that the FHA mortgage amount does not exceed the maximum FHA loan limits for the County where the property is located.
Can I streamline refinance my FHA loan at any time?
Yes, you can streamline refinance to lower your monthly payments, shorten the term or convert the loan to a fixed rate mortgage.
Pre-qualify
FHA loans are the easiest real estate mortgage loans.
The FHA guidelines are the most flexible of all mortgage loans that require less than 3% down payment.
These are some of the most basics for a FHA loan:
• 3.0% Down payment is provided by Grant, Gift from relative or won seasoned funds.
• Two years of steady employment, preferably in same line of work.
• Last two years income, preferably the same or increasing.
• Credit report should typically have no late payments in last two years.
• 12 months of perfect rental history with canceled checks or Verification by management co.
• Any bankruptcy must be at least two years old, with good credit re-established.
• Any foreclosure must be at least two years old, with good credit re-established
• Your new mortgage payment should be no more than 29% of your gross income
If you fit the above criteria, you probably qualify for a FHA mortgage loan.
Pre-qualifying gives you insight into your borrowing power.
Pre-qualifying gives you an estimate of what you are able to afford based upon the information you provided.
Please contact one of our Mortgage Advisors so we can help secure your FHA loan. 919-847-2766
