FHA Loan

FHA, also known as the Federal Housing Administration, operates under the control of the Department of Housing and Urban Development (HUD) and has the primary responsibility for administering the government home loan insurance program. This program allows buyers who might otherwise not qualify for a home loan to obtain one because the risk is removed from the lender by FHA.

The most popular FHA home loan program nationwide is the 203(b) FHA home loan  that only requires a minimum of 3% from the borrower and permits 100% of their money needed to close to be a gift from a relative, non-profit organization, or government agency.

The main advantage to a FHA home loan is that the credit criteria for a borrower are not as strict as FNMA or FHLMC. Someone who may have had a few credit problems should not have a problem obtaining FHA financing. Also, FHA home loans are assumable, allowing a person to take over the mortgage without the additional cost of obtaining a new loan. In addition, the seller must pay for part of the "traditional" closing costs (called non-allowable costs) while a borrower's allowable costs can partially be wrapped into the loan. 100% of the down payment and closing costs can be gifted.

The greatest disadvantage of FHA home loans is the upfront mortgage insurance premium (MIP). On a 30 year FHA home loan that equals to 2.25% of the loan amount (2% for a 15 year) in addition to the 0.5% annual renewal premium that a borrower will pay for the life of the loan. In addition, FHA limits the amount a borrower can borrower.

There are some credit issues that we must allow for a certain time to pass before you can qualify for a FHA loan. They are follows:

Two years from the date of discharge for a bankruptcy

Three years from the date of foreclosure

ADVANTAGES OF FHA Loans

Lower required down payment
More flexible underwriting standards
Gift funds for down payment and closing costs are allowed
Up-front Mortgage Insurance Premium can be financed
Less cash out of pocket required
The lowest down payment (as low as 3%, never more than 5%) requirement of any non-subsidized financing program
Non-occupant co-borrowers are allowed for qualifying purposes
Seller allowed to pay prepaid expenses
Seller can contribute up to 6% of purchase price toward closing cost and discount points.
Charges on conventional loans such as tax service fees, underwriting fees, copy & courier fees are not allowed to be charged to the buyer with FHA loans.
With FHA’s no cost streamlined refinancing you can lower your payment at NO COST to you. Usually, closings can occur within 2-3 weeks.
Rehab your house with only one loan using the FHA 203K program.
The FHA ARM has the best features on the market with a 1% annual interest rate cap and a 5% lifetime cap.