January 12, 2016
FHA loans are available for a wide variety of purchases. Did you know that FHA mortgages are offered for town homes, condo units, mobile homes, and many other types of properties? There are some facts you should know about FHA mortgages as well as some fictions to avoid. Here are just a few:
FACT:
FHA loans are for most types of single-family residence classified as “real property”. That means homes that are (or will be) permanently fixed to a foundation that meets state/local building code and FHA minimum standards. Mobile homes, manufactured homes, modular housing and other types of homes may qualify if they meet FHA standards. However motor homes, houseboats and other types of vehicles that cannot be fixed to a permanent foundation will not qualify for an FHA loan.
FICTION:
“FHA single family mortgages can be used to for properties that the purchaser does not intend to occupy.” This is not true–FHA loans for single family residences require occupancy for a minimum of one year. You must be an owner-occupier when the loan closes or intend to move into the property within a reasonable time after closing. Speak to your lender about what is considered “reasonable” if you have questions.
FACT:
FHA loans often feature a lower down payment than conventional mortgages. FHA loans for single family homes require a minimum of 3.5% down, where you may find conventional mortgages requiring a minimum of 10%. Your FICO scores may play an important role in the amount of down payment you’re required to make, so discuss the situation with your lender to make sure you know what may be required.
FACT:
FHA mortgage loans and refinance loans can feature lower interest rates than conventional mortgages. Again, your FICO scores and other financial qualifications may directly affect the interest rate you are offered from a participating lender, so it pays to shop around for the best rates and terms for your new FHA loan.
FICTION:
“FHA sets and/or regulates the interest rates on FHA mortgages.” That statement is not true. While FHA loan rules do require the rates on FHA loans to be “reasonable and customary” the FHA has no say whatsoever over the interest rates–you will be responsible for negotiating the rate with your lender. Again, it pays to shop around for a lender willing to offer you a more competitive interest rate on your new home loan or refinance loan.
FACT:
FHA home loans are available for rehab properties, fixer-uppers, and homes that have been affected by natural disasters. These types of mortgage loans and refinance loans have different terms and conditions than new purchase loans–be sure to discuss your needs with a loan officer to learn what options are open to you, and how those options may be different than what you might expect from a new home loan.
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.
Browse by Date: