November 30th, 2015 6:30 AM by Jackie A. Graves, President
With its low mortgage rates and
reduced qualification standards, the FHA mortgage program can be an excellent way to help purchase a
home, and today's borrowers agree.
According to Ellie Mae, 1-in-4 home loans
closed are now FHA-insured. This marks a five-point jump from just 12
months ago, and a huge increase from late-last decade.
The FHA mortgage is experiencing a
As a unique home loan program with an array
of benefits to borrowers, FHA loans make the opportunity of buying a home more
attainable and more enticing.
Plus, FHA mortgage rates routinely
"outprice" conventional ones.
FHA mortgages are not for everyone, but
they can be a useful financing tool in many home purchase and refinance
Click to see today's rates (Nov 30th, 2015)
When buying their first
home, few consumers have a twenty percent down payment to make
from savings; and many do not want to.
Money is the bank is money to be used for
emergencies and for household repairs. Owning a home costs more than just the
mortgage payment, after all.
It's scenarios such as this where FHA
As one of its many benefits, an FHA loan
allows a home buyer to put down as little as 3.5 percent on a purchase; and FHA
loans are available in all 50 states.
Furthermore, the FHA's required 3.5%
down payment can be gifted, allowing family members, employers, or charitable
organizations to contribute without harming your ability to qualify.
And, through a setup known as Seller Concessions,
sellers, builders, or lenders are allowed to contribute to, or pay, your
closing costs entirely.
In addition to allowing for a low down
payment, another touted benefit of the FHA loan program is its lenient credit
Official FHA guidelines state that a
borrower may be approved for an FHA-backed mortgage with a middle credit score
of 500 or higher. This means that you can have a credit score below 500 and
still get approved so long as your other two
credit scores are 500 or higher.
Furthermore, in exception cases, the FHA
will allow loans for borrowers with no credit scores whatsoever.
There's a trade-off for having low credit
The FHA 3.5% downpayment program is allowed
for borrowers whose credit scores are 580 or higher only. Borrowers with credit
scores below that benchmark are required to make a 10 percent downpayment, at
If your home was once foreclosed upon, or
if you recently declared Chapter 7 or Chapter 13 bankruptcy, securing a
conventional mortgage for your upcoming purchase or mortgage refinance may not
Conventional mortgage guidelines can be
strict regarding loans after a personal economic event.
However, by contrast, FHA loans can be more
With the FHA loan program, it's possible
to qualify for a mortgage just two years out of a bankruptcy, or three
years out of foreclosure, once good credit is re-established.
And, in select circumstances, the FHA
can get more aggressive than even that.
Via its Back to Work program, which
is available to consumers for whom a bankruptcy, short sale, or foreclosure was
the result of extenuating circumstances which have since been
resolved, the waiting period to re-apply for a loan is reduced to just 12
Unlike Fannie Mae and Freddie Mac, the FHA
offers a true home renovation loan, a program known as the FHA 203k.
Via the FHA 203k loan, a home buyer or
homeowner can roll the cost of a home renovations into its loan size, negating
the need for a second, separate home equity loan; or the dual-closing process
typically associated with a home construction loan.
FHA 203k loans come in two varieties.
The first type of FHA construction loan -- the Streamlined 203k -- is designed for
less expensive renovations, and allows you to roll up to $35,000 of
renovation costs into your mortgage.
The Streamline 203k is meant for smaller
projects such as repainting and reflooring; and, replacing home appliances.
The second type of FHA construction loan is
the Standard 203k.
With the Standard 203k, there is no
specific borrowing limit and all type of home improvements are allowed. This
can include foundation work, architectural or engineering projects, and
FHA home loans can be useful to a variety
of home buyers and existing home owners and, with mortgage rates low, they can
be cost-effective as well.
Take a look at today's real mortgage rates
now. Your social security number is not required to get started, and all quotes
come with instant access to your live credit scores.
Show Me Today's Rates (Nov 29th, 2015)
by ANDREW PENNER - To view the original article click here