February 28, 2018
Do you know your FHA home loan options? There are many things you can do with an FHA mortgage and buying a new home is just one of them. You can use an FHA home loan to buy, refinance, rehab, or upgrade a principal residence, with lower down payments and protections for the borrower when paying off early.
FHA New Home Loans
Did you know you can use an FHA mortgage to buy an existing home or have one built for you from the ground up? Buying an existing property is one of the most common uses of an FHA mortgage, but you can apply for an FHA One-Time Close Construction Loan (also known as an FHA Construction-To-Permanent loan) using an approved builder to have a house built brand new.
FHA One-Time-Close mortgages have only one application and closing date, unlike some construction loans which require the borrower to apply and close twice-once for the construction phase of the loan and once for the mortgage loan itself.
These types of mortgage loans can be more complex than other home loans, but for borrowers who want the home built brand-new, it’s well worth the effort.
FHA mortgages for new or existing construction are known as “forward mortgages”, but there are plenty of other options available depending on the lender.
FHA Refinance Loans
Refinancing an existing home loan is nothing new, but FHA refinance loans offer some extra options to be aware of including an energy efficient add-on to the loan for approved upgrades that will save the borrower money on monthly utility bills.
You can also refinance a home using an FHA 203(k) rehab mortgage loan that allows you to renovate, improve, and upgrade a property with FHA loan funds.
Refinancing can mean a lower monthly payment (depending on the nature of your loan) and a change of interest rate, too. Borrowers who are currently paying on adjustable rate mortgages may consider refinancing into an FHA fixed-rate loan which can end the uncertainty over rate adjustments and changing payment rates.
Some refinance loans such as FHA cash-out options are open no matter what kind of loan you originally had on your home. Others, such as the FHA Streamline Refinance option, are only open to those with existing FHA mortgages.
FHA Reverse Mortgages
For qualified borrowers aged 62 or older, the FHA Reverse Mortgage loan (also known as an FHA Home Equity Conversion Mortgage or HECM) is an option; those who qualify can apply for a loan that has no monthly mortgage payments and provides cash back to the borrower.
Reverse mortgages are designed to pull equity out of the home in cash. Qualified HECM borrowers either own their property outright or have very few mortgage payments remaining on the original mortgage. An FHA HECM loan is due and payable in full when the borrower dies or stops using the home as the primary residence.
Talk to your participating FHA lender about these FHA loan options and how to apply.
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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