FHA Mortgages Account For 1-In-4 Loans Closed
For more than a decade, the Mortgage Reports has been published non-biased, consumer-friendly articles about U.S. home loans. Our posts on “FHA loans" are among the most popular.
FHA loans include purchase loans, home construction loans, and streamlined refinance loans insured by the Federal Housing Administration; as well as loans for “special” FHA programs such as Back to Work, which allows for recent bankruptcy, foreclosure, or short sale.
FHA loans account for close to a quarter of all loans made nationwide.
There are a number of reasons why mortgage borrowers like FHA loans.
First, FHA loans allow for a purchase downpayment of just 3.5 percent. Combine this with the FHA’s of up to six percent, and a buyer can purchase a home with truly just 3.5 percent down — closing costs can be paid by the seller.
Second, FHA loans are allowed to be approved at lower credit scores than a comparable conventional loan via Fannie Mae and Freddie Mac.
FHA allows credit scores as low as 580 and, sometimes, with a reasonable scenario, loans can be approved with scores of 500.
Third, FHA loans can be “assumed” when you eventually sell your home. This means that your home with a 3.5% FHA mortgage rate can be sold with the 3.5 percent mortgage attached.
In a rising mortgage rate environment, assumable loans improve your home’s marketability.
There are other reasons to like the FHAloan program, too. The articles below highlight some of our favorites.
Our 5 Best FHA Articles
The FHA is not a mortgage lender. It’s a mortgage insurer. The agency insures all loans which meets its “guidelines”, which are the minimum standards the FHA requires on its loans.
However, unlike auto insurance or hazard insurance, where insurance premiums benefit the payer (i.e. you), FHA mortgage insurance premiums (MIP) benefits your lender.
In the event you default, your lender gets paid.
FHA MIP costs dropped in early-2015, but they can still be somewhat costly. You may not want to pay them forever.
If you’re tired of paying FHA MIP, learn how to rid yourself it. The solution may be simpler than you think.
The Federal Housing Administration makes a special refinance program available to its borrowers — the FHA Streamline Refinance.
The FHA Streamline Refinance is unique because it waives many of the standard verifications required in a refinance.
According to FHA Streamline Refinance guidelines, the program requires no verification of income, no verification of employment, no verification of credit scores, and no home appraisal whatsoever.
The main requirements for the FHA Streamline Refinance are that your monthly payment drops by five percent or more; and, that your current mortgage is currently paid on-time.
Furthermore, via the FHA Streamline Refinance, homeowners can be issued a partial refund on FHA MIP already paid. The sooner you refinance, the larger your refund.
The mortgage guidelines for an are similar to those for a conventional loan via Fannie Mae or Freddie Mac, but not exact.
One main difference relates to the purchase of a condo.
When you’re buying a condo with FHA financing, you’ll want to be aware of the FHA’s differing stances between new buildings; buildings which have been built less than one year; buildings for which control is still with the developer; and, buildings for which control has been during over to a homeowners association (HOA).
There are also special distinctions for buildings which have already earned Fannie Mae’s approval; and for buildings which have the approval of the Department of Veterans Affairs for a VA loan.
The FHA places limits on certain condo units, and you may be asked to make a downpayment of up to 10 percent because of it.
Before you plan to finance a condo via the FHA, be sure to know the rules.
The FHA is the lone government agency to offer a home construction loan. The program is formally known as the FHA 203k.
The FHA 203k combines your “main mortgage” and your construction loan into one product, simplifying the home building or renovation which you have planned.
There are two varieties of 203k loan — the standard 203k and the streamlined 203k.
The standard 203k is used for more “in-depth” projects such as landscaping, roof replacement, and the movement of loan-bearing walls. The streamlined 203k is used for smaller projects such the painting of rooms or the replacing of appliances.
Streamlined 203k loans are limited to $35,000 in cost. There is no size limit prescribed to the standard 203k.
Nearly 25% of all closed loans are FHA loans — that’s the second-largest market share of among all the common loan types. And, there are reasons why the FHA loan is so popular.
The most-commonly cited reason why FHA loans are popular is that the FHA allows downpayments on a home of just 3.5 percent. This helps buyers who have little to put down, or who would rather save their cash for things like furniture and home improvement.
The FHA also allows lower credit scores as compared to other loan types.
With a conventional mortgage, credit scores below 700 are linked to higher interest rates. With an FHA-insured loan, mortgage rates stay low all the way to 580.
Furthermore, FHA loans are assumable. This means that a future buyer of your home can purchase your property and take the mortgage that comes along with it — no matter how much lower than the market your rate happens to be.
In a rising mortgage rate environment, this can dramatically increase your home’s marketability.
There are lots of reasons why FHA loans can be excellent. Read more to discover them.
What Are Today’s FHA Mortgage Rates
FHA home loans can be terrific. They come with lower mortgage rates than a comparable conventional loan, and their approval standards are more forgiving as compared to other loan types.
Take a look at today’s FHA 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.