April 29, 2011
In our last blog post we discussed how the lender processes applications and the information on them when approving FHA home loans. The FHA has a strict set of rules covering what must be used to underwrite the loan and how the borrower’s personal data must be verified in order to process the loan paperwork. Three areas are explored at length by the lender;
April 29, 2011
There are many types of FHA insured loans available for single-family residences. Borrowers can apply for a traditional home loan with a down payment, fixed interest rate and a 15 or 30-year mortgage. But there are plenty of other loans which can be applied for including; Section 203h Insured Mortgage for Disaster Victims Section 255 Home Equity Conversion Mortgage (HECM) Section 203k Rehabilitation Mortgage Energy-Efficient Mortgage Program (EEM) Adjustable rate mortgages Section 248 Indian Reservations and Other Restricted Lands Title I Home Improvements Regardless of what loan product is preferred, for new purchases and many FHA refinancing options, borrowers must fill out an application giving information that includes employment and residence history, detailed accounts of outstanding debts and monthly financial obligations and much more. The FHA requires this information in | more...
April 28, 2011
The FHA Reverse Mortgage program, also known as a Home Equity Conversion Mortgage, is a type of loan product available to borrowers age 62 and older and with sufficient equity built up in the property. The reverse mortgage program offered by the FHA has terms that include no monthly payments. The HECM is paid off when the owner dies or sells the property. The borrower gets the proceeds from the HECM loan dispensed according to the loan agreement, which can include a line of credit, installment payments or a combination of the two. Because of the unique nature of an FHA HECM loan compared to other mortgage loans, the FHA requires the applicant to get loan counseling before the loan may be approved. The FHA wants borrowers to be fully | more...
April 28, 2011
The FHA Home Equity Conversion Mortgage or HECM loan, also known as a reverse mortgage, has terms and conditions that must be clearly understood in order to get the most out of the loan. HECM loans have strict rules that must be followed in order to avoid violating the terms and conditions, which is why the FHA requires HECM loan borrowers to get counseling on reverse mortgages before they can be approved for an FHA HECM loan. The reason understanding these terms and conditions are so important has much to do with the nature of the loan itself–no payments are due from the borrower at any time unless he or she dies or sells the home. But if the borrower violates the terms of the loan, the lender is able | more...
April 27, 2011
“How can the FHA help me buy a home?” That’s one of the most frequently asked questions about the FHA home loan program. There is plenty of information about FHA home loans, but if you’re a first-time home buyer and don’t know where to look, having that question answered may be the most important part of the decision making process when trying to choose between a conventional loan and an FHA home loan. FHA loans are different than conventional mortgages in several basic ways. To start, FHA-insured loans are more attractive to lenders because the U.S. government backs the loan. That means lower risk for the lender. Because the government insures the loan in case of default or foreclosure, applicants with past credit trouble may have an easier time getting | more...
April 26, 2011
In recent blog posts we’ve discussed the fact that the FHA does not set interest rates on the loans it insures. Forces in the marketplace already determine the state of housing market interest, for the FHA to get involved in setting rates for FHA-guaranteed loans would involve a whole new layer of effort and study to keep up with ever-changing market conditions. Instead, the FHA allows lenders and borrowers to negotiate the rates. What the FHA does do is to control the fees and charges associated with an FHA loan. FHA rules state fees and costs must be “reasonable and customary”. For example, FHA rules allow the lender to collect an origination fee. For loans through the end of 2009, the fee was limited to one percent. The one percent | more...
April 26, 2011
One of the most common misconceptions of the modern FHA loan program is that FHA or HUD is responsible for setting interest rates on the home loans insured by an FHA loan. It’s easy to understand why some might think that is true; the FHA does place limits on certain fees, how closing costs and down payments are paid and by whom. Why wouldn’t the FHA also regulate the interest rates of an FHA-insured mortgage? The FHA does regulate (but does not set) interest rates in some cases. Any FHA-insured adjustable rate mortgage, for example, has built-in limits on when the rates can be adjusted, and how often. There are even caps on how many percentage points may be changed over the lifetime of the variable rate loan. But what | more...
April 25, 2011
Negotiating isn’t easy, no matter which side of the table you’re sitting on. The buyer wants to get the best deal for money spent, but doesn’t want to make an offer that is too low for fear of scaring off the seller. From the seller’s point of view, getting the most out of a major investment like a house is crucial, but ask too much and the buyer may look elsewhere. When it comes to buying a home with a FHA guaranteed mortgage, the FHA loan program has some options buyers and sellers alike should consider to make the purchase more attractive. In the course of buying a home with a FHA-guaranteed mortgage, buyers and sellers can negotiate a sales price, but what if that price is higher than the | more...
April 25, 2011
Some borrowers decide an adjustable rate mortgage is an option they’d like to look into. While there is a natural risk involved with adjustable rates–the interest rate can increase and raise the amount of monthly payments–borrowers who shop around and compare terms may be able to get into an adjustable rate mortgage that has more favorable terms. It’s a smart idea to go into an adjustable rate mortgage with the notion that you should refinance later into a fixed rate loan. The FHA streamline refinancing program has a way to do just that for those who have FHA ARM loans. Other refinancing options may be available for conventional-to-FHA loans, we’ll explore refinancing issues in another blog post. What should a borrower do to find the best adjustable rate mortgage? To | more...
April 22, 2011
When an FHA loan applicant fills out the loan app, employment and