Federal Housing Administration Loans
For the thousands of homeowners who are seeking to purchase a new home or refinance
their current home a FHA home loan may be the perfect solution to financial issues. FHA home loans are particularly useful for those seeking to purchase who cannot put down a large down payment, but hope for low monthly payments and do not have outstanding credit scores.
Applying for and receiving a conventional loan would be very difficult for these people. However, the FHA will consider qualifying people in this kind of financial situation for a home loan.
The FHA was created in 1934 was incorporated into the Department of Housing and Urban Development (HUD) in 1965. Due to the FHA's connection with home loans they are often thought of as a lender.
However, they are not a lender. Their job is to simply insure home mortgages throughout the world.
The lenders are insured by the FHA should a loan fall through because a homeowner defaults on their mortgage. The FHA will insure single and multifamily homes, even if they are manufactured, and hospitals.
The FHA is unique in the fact that is does not need a single penny from a taxpayer to fund its operations. It can operate completely off of the mortgage insurance which is part of the mortgage payment.
This program helps first time home buyers to buy a home when they would not qualify otherwise because the risk would be too high for the lender. However, when the FHA takes the responsibility for the loan, lenders are more willing to provide the necessary loan.
Many people believe that a Federal Housing Administration loan is only available to a first time home buyer. However, the Federal Housing Administration is willing to provide loans to second, third, fourth or fifth time home buyers as well.
The only restriction is that you can only have one loan at a time. The mortgage limits that a FHA home loan will cover differ according to geographic location and the local housing standards.
The protection and assistance the Federal Housing Administration is ideal for everyone. The lender feels safe knowing they will receive their money one way or another and the home buyer gets the opportunity to purchase the home of their dreams.
In addition, the FHA home loans are completely assumable. This is a very valuable protection for you and your family.
An assumable loan at a good interest rate is ideal if you should decide to sell your home in the future. However, if you decide to refinance your home the loan does not have to be a Federal Housing Administration Loan.
If you decide to refinance a loan you are actually doing what is called a streamline refinance. As every situation is different, every Federal Housing Administration loan must be applied for one at a time.
When reviewing your statement, the FHA will review your ability to make payments and cover necessities. They also puts less emphasis on FICO scores when a FHA loan is applied for than a conventional lender would put on a conventional loan.
The qualifications for a FHA loan are also based on a debt-to-income ratio that is more lenient to the borrower than a traditional loan. For example, they believe that housing expense should not surpass 29% of a borrower's income.
In addition, total debt should not surpass 41% of a borrower's income. Down payments for a Federal Housing Administration loan are also usually 5% or less.
Federal Housing Administration loans are also available in either rural or urban locations. Federal Housing Administration home loans are the perfect solution to purchasing a home when the options are limited for first time home buyers.
by: Ignacio Lopez
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