December 13, 2010
First time home buyers considering an FHA mortgage have many things to
learn about the home loan process in general. In the home loan industry it’s common, for example, to advise borrower to start getting ready for a home loan at least a year in advance–that comes as a surprise to many new applicants and sends some of the back to the planning stages just when they felt ready to commit to a loan application.
For FHA home loans the usual learning curve also applies, but there are a few extra things to understand about FHA loans, especially when compared to conventional loans.
It’s easy to make assumptions about government home loans. Take interest rates–the FHA and HUD do not regulate, set or control interest rates on FHA home loans. Interest is something that must be negotiated between the borrower and the lender and the rate a loan applicant gets is often dependent on a variety of factors including credit score.
People assume that credit scores are the determining factor in eligibility for an FHA home loan the same as conventional loans; the FHA’s process differs from conventional loans and credit score is not viewed the same for an FHA mortgage. But that doesn’t mean the lender won’t set interest rates accordingly.
The FHA also does not regulate closing costs per se, but FHA requirements do state that “reasonable and customary” closing costs and other fees may be charged. What’s “unreasonable”? That would likely be determined by the FHA on a case-by-case basis but some items may not be charged to the borrower and are already spelled out.
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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