Simplified explanations of common mortgages and loans
- Conforming Loans
- Construction Financing
- Conventional Loans
- FHA Loans
- First Time Homebuyer
- Mortgages for Foreigners
- HARP Refinance
- Interest Only
- Jumbo Loans
- Reverse Mortgages
- Second Home
- VA Loans
Various articles explaining the variations and implications of a commonly used mortgage terminology.
Florida FHA Loans and Mortgages
Let's start with "What is FHA?"
FHA is the Federal Housing Administration, which is a part of HUD (Department of Housing and Urban Development's). FHA provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages loans on single family and multifamily homes (up to four units) including manufactured homes and hospitals.
FHA mortgage insurance is paid by the borrower but does not protect the borrower. It protects the lender in the event of a borrower's default. If the Borrower does default, the lenders bear less risk because FHA will pay a claim to the lender. The only benefit for the borrower is the ability to purchase a home with a small down payment and as little as 3.5% plus closing cost.
Although FHA guidelines are very lenient, a FHA approved lenders will have their own guidelines or overlay's. These minimums must be met by the borrower in order to get the mortgage loan. FHA guidelines can be more flexible as with the borrower's debt to income ratio, but the lender's underwriters will be more stringent towards other guidelines.
In the past mortgage insurance as part of the monthly payment, in most cases would drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property -whichever is longer. However with changing regulations which took effect April 1st of 2013, the mortgage insurance on FHA loans with a loan to value (LTV) of 90% or greater would be for the life of the loan and will not drop off. Loans with an LTV of 80 to 90% will have to be paid for 11 years before dropping off.
Because of FHA mortgage insurance, lenders can -- and do -- offer FHA loans at attractive interest rates and with less and more flexible qualification requirements. Lenders underwrite FHA loans to ensure that the customer has the willingness and capability to repay the loan, but they do have flexibility beyond pure credit score to look at the borrower's financial situation.
Borrowers should be aware of the cost of the loan and not fall into typical bank traps with lower rates. Remember it's not just about the note rate but your true cost of credit. Watch your APR! (see my education center and hit the TRAPS tab).
FHA mortgage loans allow a Borrower to use their own saving to make their down payments, But also allow other sources of cash include a unlimited gift from a family member, or a grant from a state or local government down payment assistance program.
The FHA mortgage loan does allows home sellers, builders and lenders to pay some of the borrower's closing costs and or pre-paid's, such as an appraisal, credit report or title expenses. As well as a proration of taxes and insurance pre-paid's.
Remember FHA is not a lender, but rather an insurance fund; borrowers need to get their loan through an FHA-approved lender (as opposed to directly from the FHA). Not all FHA-approved lenders offer the same interest rate and costs -- even on the same FHA loan.
As does the Government, we encourage consumers -- from a cost, service and underwriting standard -- to shop around many lenders or mortgage brokers to make sure they understand what the best fit is for their particular situation. However a consumer must be aware that ever time their credit is pulled it may negatively impact their credit score. A lower credit score affects your interest rate. (see my education center and hit the understanding credit tab)
FHA mortgage insurance requires two premiums on all FHA loans: The upfront premium which is a percent of the loan amount, and the annual premium which is paid as part of the monthly payment on the FHA Mortgage Loan amount. The upfront premium must be paid when the borrower gets the loan but can be financed as part of the loan amount. The annual premium is paid in chunks of 1/12th of the total along with each month's mortgage loan payment.
The FHA has a special loan product call FHA 203(K) for borrowers who need extra cash to make repairs to their homes. The chief advantage of this FHA 203(k) is that the loan amount is based on the estimated appraised value of the home and projected value after the repairs are completed. There are limits to the amount over your purchase price.
When shopping for a mortgage loan a borrower should not only shop rate and total cost, but what are all the types of loans available for them. At Solutions First Mortgage Inc. we believe you should know what all you options are. If you get a quote from any bank or lender bring it us to for a free review. If we can't beat it we will at least try to help you improve it with that Bank or Lender.
FHA Loans Available in Florida
For further information about getting the right mortgage for you and to arrange your 'NO-FEE ASSESSMENT'
CALL US on (+1) 941-921-1110
Reverse Mortgage Purchase
Construction Loans Interest Only Second Home Vacant Land Financing
Home Buying - understanding the buying process
Keeping in order – the paperwork process
Different loan types
Rent vs own
Mortgage Rates Locking in interest rate
Purchase strategies Pre-qualification vs Pre-approval Avoidable Expenses
READ THIS FIRST
Qualifying for a mortgage
Zero down – VA, USDA & seller concessions
Contractual Finance Clauses -
Loan and Mortgage types
Settlement cost – What is the HUD1?
Good faith estimate – the maximum cost to obtain the loan
The Til – Truth in Lending
RESPA – Real Estate Settlement Protection Act
Mortgage Insurance - PMI
Disclosures – Understanding Disclosures
Servicing – Banks
Economy/ Markets – the impact on rates
Fannie & Freddie – why they important to you
Credit Score – How credit score affect your interest rate
Read our blog about everything involved in finding, buying and living in your new home from a mortgage brokers perspective.
Read my opinions about legislation, what it means, how I understand it and how it could be improved.
We have online newsletters and classes explaining in layman’s terms how mortgages work and how to choose the best one for you