FHA Loan Articles
News, updates, and explanations to keep you informed.
FHA Loans vs. Conventional Loans: The Difference
FHA loans have much to set them apart from conventional loans. FHA guaranteed loans don't carry credit requirements as stringent as with conventional loans. The down payments are lower, for those who want to refinance their homes there are FHA-insured programs for typical refinancing needs.
FHA loans have a low 3.5% down payment, and when you compare to the 5% or higher down payment requirements in conventional loans, it's easy to see how you can save with an FHA loan. For conventional loans, some banks want 10% to 20% down in some cases.
Depending on which FHA loan you seek you may be able to add a non-occupant co-borrower. Doing so can improve your chances to qualify for an FHA home mortgage. Keep in mind that some FHA loan products have restrictions on co-borrowing. The HOPE for Homeowners refinancing loan is one example; under the HOPE program, non-occupying co-borrowers are not permitted but you may have a non-occupying co-signer as long as that person has no interest or ownership in.
Interest rates are lower with FHA home loans than with many conventional options, and that saves you over the lifetime of the loan. Even if your interest rates only save you $50 per month, over a 15 year loan or more, that $50 turns into a substantial sum.
LENIENT CREDIT REQUIREMENTS
FHA loans are made to help people get into home ownership, even if there is limited or no credit. The FHA has much to offer those still new to building credit. Don't assume your credit is too poor to apply-let the FHA determine your eligibility. You will be required to show proof of steady income and other documentation, but if you are eligible for an FHA mortgage, you'll get one. Did you know that having no credit score isn't an obstacle to qualifying for some FHA-guaranteed loans?
If you already have an FHA mortgage you may qualify for what the FHA calls Streamline Refinancing. With a Streamline loan, borrowers who are current on their existing FHA mortgages can refinance with fewer requirements than with conventional refinancing. There is no requirement to have the home reappraised, no credit check, no income verification or even a face-to-face application process. This program is only for FHA mortgage borrowers who are current and in good standing on their existing loans. Conventional lenders will run a credit check before issuing home equity loans and other refinancing packages.
FHA guaranteed loans feature limitations. FHA loans have minimums and maximums determined by the county where you apply for the loan. These limits change from time to time depending on legislation or other factors which can affect the housing market. You can't buy commercial properties or private clubs with an FHA loan. You must live at the home once you purchase it. If you want to buy a large property, FHA loans apply only to the building and the first ten acres.
You are permitted to purchase multi-family units or condominiums, but certain guidelines apply in each individual case. As with single-family homes, you are required to occupy the condo or multi-family dwelling you purchase with an FHA loan.
When bringing on a co-signer for an FHA home loan, there are debt-to-income issues to consider. Does your co-signer have his or her own amount of debt? This may count against you in the application process if that debt is too great. Ask your lender for advice before agreeing to include a co-signer on your FHA guaranteed loan.
Every type of FHA-insured loan product is different. What applies for a first-time homebuyer may not translate when applying for an FHA refinance loan or an FHA Streamline refinancing loan. Ask your lender about the terms of the specific FHA loan you want.
FHA NEWS and RELATED ARTICLES
One type of question that sometimes arises about FHA loans-- Is there a no-credit-check version of an FHA mortgage loan? What is the criteria required for FHA loans that do not require a credit check and/or appraisal?
One not-so-common question about FHA loans still comes up often enough to discuss in detail. Some FHA loan applicants want to know if they can purchase a residence from another family member using an FHA insured mortgage.
Except for obligations specifically excluded by state law, the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios if certain conditions are met.
Some FHA borrowers have questions about applying for an FHA loan after experiencing a short sale on a previous home. The FHA loan rules found in HUD 4155.1 have the answers for borrowers applying for an FHA mortgage after a short sale.
The FHA and HUD issued new rules for mortgage insurance designed to add fiscal security to the loan program, and when those rule changed the new guidelines were published in Mortgagee Letter 2013-04.