May 22, 2024
FHA loans have some special features. There are important options to know before you start applying for a home loan.
Financing Mortgage Insurance On Your FHA Mortgage
Borrowers without a 10% downpayment on their FHA mortgage are required to render a mortgage insurance premium. This is payable for the loan’s lifetime. Those who make a 10% downpayment qualify to have the insurance removed after 11 years.
It pays to make the larger downpayment on an FHA mortgage even if you don’t have to.
But if you choose to save money upfront on your home loan, you can include the FHA Up-Front Mortgage Insurance Premium (UFMIP) in your home loan amount. Ask your loan officer about this option early.
FHA loan rules in HUD 4000.1 require you to pay the entire amount in cash OR roll the entire amount into the loan at closing time. FHA loan rules add that no partial payments are accepted.
Automatic Contingency Clause For FHA Appraisals
Typically, borrowers who want a contingency clause (which can include making the purchase of the house contingent on the home passing the appraisal process) must negotiate for one. But FHA loans anticipate one of the issues that may require such a clause.
FHA home loans are unique in that one contingency clause is automatically included in the purchase agreement. Your seller must abide by that clause even if it is not explicitly written in the loan paperwork.
If the house appraises for an amount below the seller’s price, you are permitted by law to walk away from the loan, and in these cases, you do NOT lose your earnest money.
Different Loans For Different Properties
If you apply for an FHA loan to buy a home, that property must typically pass an FHA appraisal. In cases where there may be serious issues with the property, the purchase loan may not get approved. But there are options
If you know to ask the lender for an FHA rehabilitation mortgage to buy such a property, the appraisal becomes relevant for the completed work.
Your new home’s appraised value after the renovation is the important dollar amount in this transaction, not the before-appraisal value.
Adding Funds To Your FHA Mortgage
FHA mortgages can add funds to your loan amount for approved purposes.
Those may include the FHA energy-efficient mortgage option, which allows the borrower to get extra loan funds meant to be used to install approved energy-efficient upgrades.
You can use this option with most FHA mortgages, including new purchase loans and refinance loans.
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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