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Posts Tagged ‘Fha Loan’

FHA Home Loan Requirements are pretty clear cut and in the past two years, especially, if it was not for FHA Home loans, then many people would not be able to get a loan.

Everyone is familiar with the fact that there has been a recession that caused many of the banks to actually go bankrupt. When you turned on the news you saw people who were peering through the glass of their banks, and banging on the doors, demanding to remove their money before the padlocks went on their bank permanently. Government insured loans, such as the FHA loans, have become a very popular and viable option.

Even people who have a bankruptcy can qualify. According to the FHA Home Loan Requirements the bankruptcy just needs to be at least two years old. If you have a foreclosure on your credit, as many people have found themselves in this situation, with an FHA loan it needs to be at least three years since the foreclosure.

Many conventional loans have much stricter criteria. Some conventional loans will not allow a loan if there has ever been a foreclosure on your record. Since taking the severe and drastic steps of filing bankruptcy or obtaining a foreclosure, the borrower must have since had perfect credit showing good faith in their ability to now maintain the responsibility of paying their bills on time from that point forward. FHA Requirements are very forgiving for imperfections and hard times in the past.

The ability to show that you can hold a steady job and in one profession is also within the FHA Home Loan Requirements. You need to have worked at least two years at the same place of employment or at least in the same profession. This shows that you can keep and maintain consistent income and is a very important requirement to get a loan. And not only should you show consistency with where you worked, you also need to show solid stability within your income or an increase in your income.

The minimum credit score within FHA Home Loan Requirements varies from time to time. Consistently it has been 620, however. And another thing that FHA look for is that there have been no payments made more than thirty days late at any time, but especially twice within a two year period. And lastly there should be no more than thirty percent of your income going to the mortgage that you are applying for.

FHA home loans have become the most popular way of home financing in the country because of the low credit score requirement and the low down payment. FHA Home Loan Requirements are not that stringent and if you meet them you could be well on your way to home ownership.

Many prospective homeowners and mortgage professionals have heard that the regulations for FHA loans are changing. After the sub-prime mortgage industry died down, the FHA home loan program became the scapegoat for any and all problems associated with the housing market. Critics believe that the FHA loan program is too lenient on its credit requirements. Because of this constant scrutiny and other outside criticisms, the FHA has decided to make some significant changes to its qualifying requirements for its home loan program.

In past years, the FHA home loan program did not require a specific credit score in order to qualify for their loans. Although most lenders required at least a 620, many critics of the FHA’s program believe that the lack of a credit score requirement has led to the large number of defaults after the housing market crash. In order to prevent this from happening in the future, the FHA’s new rules state that a borrower must have at least a 580 credit score in order to take advantage of their 3.5% down payment program. If an applicant has a credit score below 580, they must put at least 10% down on a new home.

A protection that has always existed on FHA loans is the required mortgage insurance. Mortgage insurance provides benefits for both the homeowner and the lender. This type of insurance helps the lender because it ensures that they will be paid in case of borrower default. Because the lender knows that the loan is insured by the federal government, they are more likely to offer favorable terms to the borrower.

A new change to the FHA’s mortgage insurance raises the up front premium by half a percent from 1.75% to 2.25% of the loan amount. This effort is a way to ensure the sustainability of the FHA loan program. The FHA is currently trying to obtain Congressional approval to increase the annual premium. If this approval is granted, the FHA would reduce the amount by which they increased the up front premium. Some FHA officials have discussed making the premiums risk based, which would mean that the premiums would vary depending on credit score and history.

The last protection which the Federal Housing Administration has decided to implement with these changes is a reduction in allowable seller concessions. When these new regulations go into effect, the seller will only be able to provide 3%, whereas before, the seller could provide up to 6% of the purchase price. These regulations are all set to take effect in April, 2010 and are an effort to increase the quality of FHA loans.

Only time will tell if these regulations will have the desired effect and increase the quality of the FHA home loans issued. Many homeowners are in agreement with the changes because they want the housing market to bounce back quickly and believe that the best way for this change to occur is to require more of prospective homebuyers. Other homeowners believe that, while encouraging people to improve their credit is beneficial, restricting home loan applicants does more to hinder the housing market rather than stimulate it. Hopefully, these new changes will have a positive effect and help the housing market grow and prosper.

Is it time to consider mortgage refinancing? The FHA loan refinance could be your open door.

If you are a homeowner, you have already experienced applying for a mortgage. According to FHA, refinancing with this insured mortgage is the same as applying for any other home loan but in addition qualifying standards are easier and protections better.

The following six pointers from the Federal Housing Administration will help you decide whether an FHA loan refinance is worth pursuing.

1. Do you currently finance with an FHA home loan?

If you do, there are a few more options available to you such as an FHA streamline refinance. If you don’t know what type of loan you have, ask your current mortgage servicer. No matter which mortgage you’ve had in the past, an FHA loan refinance might be right for you today.

2. Why are you refinancing?

Perhaps you intend to take advantage of the current interest rate environment. You may want to consolidate other debts such as credit cards or home equity loans into one. If you intend to make some home improvements, you may be contemplating the option of taking out cash from a portion of your equity.

Whatever your home loan refinance goals are, knowing your primary purpose to refinance will help determine if there is an applicable FHA refinance mortgage for you.

3. How much can you afford?

Most people let their lender tell them what they can afford but there is a fundamental difference between affordability and qualification. I looked up afford in Merriam-Webster’s Online Dictionary. Afford means manage or bear without serious detriment.

But no lender can tell you what you can manage without detriment to your financial affairs. Only you can decide that. So before you contact an approved FHA lender, give some serious thought to how much you can afford in a home loan.

4. Shop for an FHA approved lender.

Contact several lenders. Prepare a cheat sheet telling why you are in the market for a refinance and that you are considering FHA home loans. Not all lenders are approved by the Federal Housing Administration so ask upfront if they have approval.

Compare mortgage closing costs and interest rates between lenders. Ask for a preliminary Good Faith Estimate detailing fees, loan amounts, interest rate, loan program and monthly payments. Then simply compare the information.

Also ask when you can lock in your interest rate, for how long, and if there are charges for locking, upfront or included in the loan. Find out the policy if interest rates were to drop during the FHA loan refinance process. Request and review a written rate lock agreement before making application.

5. Ask to be prequalified upfront.

Prequalification works well for refinancing because it is not as in depth as mortgage preapproval. Because prequalification is informal, you don’t need to provide social security numbers. This eliminates multiple credit inquiries.

Getting prequalified by a lender helps to estimate the amount you will be qualified to borrow. The amount will be based on simple criteria, for example salary, debt ratios, and whether you’ve had a foreclosure or bankruptcy in the past. Most mortgage brokers will do this over the phone or in person if you prefer.

6. Now it is time to apply for the FHA refinance mortgage.

Your lender will order your credit report and give you a checklist of documentation they require to process your FHA loan refinance. No need to put off refinancing when FHA could be your open door.

Buying a home can be an exciting, yet stressful, time. There are so many different loan options for borrowers to choose from such as: Conventional, FHA, VA and No-Document. One of the loan options that is gaining popularity is the FHA loan.

Federal Housing Administration (FHA) mortgages are insured by the federal government. But let it be known that FHA does not give out loans. They offer assistance to borrowers in getting a loan to make the lenders more at ease. It is mostly designed for low and middle income borrowers and many first-time home buyers. If the borrower’s credit is not up to par, then this just may be the right program for them. Under FHA loans, the borrower must pay mortgage insurance premiums (MIP). The initial premium is based in part on the term of the loan and the amount of the down payment. This can equal as much as 2.25 percent of the amount that was borrowed. The premium can be financed into the loan. Also, the annual MIP can vary from.25 to.50 percent of the amount that was financed. The borrower pays this as a part of the monthly mortgage payments.

There are a few requirements for an FHA mortgage. One of these requirements is that you must have a positive credit history over the previous two years. Lenders check to make sure that the borrower did not have any bankruptcies over those past two years. Also, one thing to remember when applying for an FHA mortgage is to not make a major credit purchase. This could hurt the borrower’s debt-to-income ratio. The borrower must also have a good employment history showing that their income has been consistent. If the borrower has been employed by the same employer for at least two years, then that could be a plus. There is no minimum income requirement in order to get an FHA loan. Depending on the borrower’s monthly income, lenders want to make sure that their mortgage payment is 30 percent or less of their gross income. Another requirement for an FHA loan would be the ability to make a down payment of at least 3 percent of the purchase price. Most likely, if approved, the borrower can expect to obtain a fixed rate loan.

FHA’s mission is to help borrowers receive the right loan amounts that they qualify for. If the borrower can meet all of these requirements, then they are on the right path to achieving that American dream!

The Federal Housing Administration or FHA manages the home loan system at the national level, being accessible to Americans from all states. With an FHA there are insurances against default, which means that in case the borrower does not have the possibility to pay for the mortgage, FHA will cover the rate. This allows people to lend larger sums of money because with the FHA guarantee comes a higher flexibility on the part of the borrowers. Although more people can qualify for an FHA home loan than for a regular home loan, not everybody is eligible.

While in first-time-home-buyer programs you will have a whole series of limitations, income is not an issue with an FHA loan. The amount you can borrow depends on the income and the home prices in your region. You can check the general home costs for your neighborhood on the Internet on a website like HUD.com. Then, the credit report should be at least average and the debt to income ratios must be satisfactory. If you have a decent credit report you can have access to an FHA home loan.

The down-payment with an FHA home loan can be as small as 3%, plus there is leniency during financial difficulties, and no prepayment penalties. Insurance premiums are a must with such a loan: you’ll first have to pay a 1.5% premium, continuing with monthly fees. The collected insurance premiums may actually work for the payment of the mortgage in case you default on the FHA home loan. The solutions available with the Federal Housing Administration are not suitable for everybody, and there are limitations to the system.

An FHA home loan will not work too well for someone who needs a large sum of money. Plus, the the ongoing fees and the upfront mortgage insurance premiums can prove more expensive than the private mortgage insurance. Most of the time, home buyers with excellent credits use more competitive offers in the private sector and do not apply for an FHA home. The way a borrower addresses home purchases varies from case to case, and this is also obvious in the evolution and the policies of the lending companies. Moreover, mortgages have received a heavy blow from the current financial crisis.

You hear it almost everyday that getting a mortgage is getting harder. One of the hardest loans to get right now is a construction or home improvement loan. Once again FHA is helping borrowers with their home improvement needs.