June 22, 2016
A recent CNN Money article reveals that more than 10 million Americans spend half their income on rent. It’s a figure (based on a 2014 study at Harvard) that is surprising to some, and motivating for others. Are you considering an FHA mortgage as an alternative to high rents?
FHA home loans have features that can be very helpful to those in the market for a new home. Consider the down payment requirement for an FHA mortgage compared to many conventional loans and it’s easy to see that the FHA’s 3.5% down payment requirement compared to between 10% and 20% down for conventional mortgages depending on the lender and the borrower’s financial qualifications.
The lower down payment is one factor; another is the borrower’s ability to refinance an FHA mortgage at a later date using an FHA Streamline Refinancing loan, which is designed to help lower interest rates and/or monthly payments. Another factor in FHA loans that borrowers should definitely explore is the option to add energy efficient improvements to the property to be purchased.
This is known as an FHA Energy Efficient Mortgage (EEM) and allows additional funds to be added to the loan for these approved upgrades.
The borrower will work together with the lender to determine what needs to be done to include the energy efficient improvements; funds will be made available based on the agreement worked out between borrower and lender–borrowers should know that all improvements must be approved by the lender. An energy efficiency rating of the home may be required and the borrower may also need additional documentation that shows how the proposed upgrades will improve the property.
A home doesn’t have to be brand new (as the FHA EEM program implies) to be eligible for an FHA mortgage. It also doesn’t have to be a typical suburban home. Condos, town homes, manufactured homes, mixed-use homes (that meet FHA guidelines) and other properties may be available.
You can also explore your options to buy a fixer-upper home using an FHA 203(k) rehabilitation loan, which permits the financing of both purchase and improvement funds at the same time.
The CNN article mentioned at the beginning of this blog post also discusses the current affordability of home buying; according to the article by Kathryn Vasel, “While renters are paying more, affordability is improving for those who own their homes. The number of cost-burdened homeowners declined in 2014 for the fourth consecutive year, according to the report, thanks to low mortgage rates. ”
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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