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
When applying for an FHA home loan, some lenders may ask for tax paperwork as part of the application process. Some borrowers may wonder if this is legal, or an acceptable practice for home loans in general.
There are many questions about the official FHA loan rules for occupancy for single-family home loans. According to FHA rules, a borrower must occupy the home purchased with a single-family FHA loan as a personal residence as a condition of loan approval.
After the housing market crisis of the previous decade, many mortgage borrowers found themselves having trouble making their monthly payments. In some cases, borrowers just walked away from the mortgage completely and allowed the home to be foreclosed upo
The FHA has announced it would accept electronic signatures (also known as e-signatures) on several FHA home loan documents. The new policies are found in detail described in FHA Mortgagee Letter 14-03.
Some of your FHA loan closing costs may be financed, and some may--after being negotiated between buyer and seller--be paid by the seller within the boundaries of the FHA loan programís rules. The borrower can also pay some closing costs out of pocket.