October 8, 2021
What are your concerns about buying a home with an FHA home loan? For some, it’s about how much the loan will cost month-to-month, while for others the issue of the loan’s long-term cost can be a worry. If you aren’t sure how the FHA home loan program works, you’ll definitely want to read on.
What You Can Buy With An FHA Mortgage
In general, FHA home loans are for owner/occupiers who want to buy a home to use as their primary residence. You can buy a property with as many as four units as long as it meets FHA minimum standards and you are financially qualified for the mortgage loan.
FHA loan applicants may apply for any type of FHA loan offered by a participating lender including mobile home loans, manufactured homes, condo units, townhomes, mixed-use property, etc.
The General Guideline For Properties You Cannot Purchase Or Refinance With An FHA Mortgage
If you don’t intend to live on the property, or if your chosen property can’t be taxed as real estate (if it has no permanent foundation at closing time, for example), or if your chosen property is NOT a primary residence (but rather a bed-and-breakfast, condo-hotel, timeshare, vacation home, etc.) it will not be eligible for an FHA mortgage.
Certain exceptions may apply-manufactured homes that do not begin on a permanent foundation may be purchased with the requirement that the property be affixed to a permanent foundation that meets local/state/federal regulations.
What Kind Of Loan You Can Get With FHA
Borrowers can apply for FHA mortgages to buy or refinance a home. The home being refinanced with an FHA mortgage does not have to have an existing FHA loan, but the property must meet FHA loan requirements.
Borrowers may night realize the options they have with an FHA mortgage or refinance loan. Those options include fixed or adjustable rate mortgages, fixed or adjustable refinance loans, fixer-upper loans for smaller projects and large-scale rehab loan opportunities.
Your choice of loan types also includes a choice between 15-year and 30-year mortgages. Borrowers who choose a shorter loan term may discover alternate interest rate options depending on qualifications and circumstances.
Remember, not all lenders may offer the same types of FHA mortgages; what is available at one financial institution may not be available at another in the same housing market. You’ll need to have a conversation with a loan officer to see what is possible at that lender.
FHA Loans: No Penalties For Early Payoff and Other Perks
Compare the terms and conditions of an FHA home loan to conventional mortgages; note the FHA prohibition on penalties for paying more than your monthly mortgage payment or paying off the entire loan earlier than specified in the note.
Depending on lender standards, state law, and other requirements you may need to notify the lender in writing if you intend to pay off early. Be sure to discuss these options with a loan officer to make sure you know what your rights and responsibilities are for the final payment.
FHA loans also do not allow a home or condo owner buying with an FHA mortgage to be subject to restrictions on how he or she may dispose of the property. FHA loans cannot be approved for purchases with “restrictive covenants” that force the borrower to get approval from elsewhere prior to selling the home.
Borrowers who apply for FHA adjustable-rate mortgages or believe they would like to do so should compare the terms and conditions of the FHA versions of these mortgage loans.
FHA loan rules have strictly controlled rate change and rate change frequency policies-you may not be able to predict why rates might be subject to change, but FHA loan rules govern and limit those adjustments based on the type of ARM loan you are applying for.
Talk to your loan officer about FHA home loan and refinance loan options today-you may be surprised to learn you have more possibilities than you realize.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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