FHA Loans

FHA Loans allow a low down payment, first time buyers help, PMI and closing cost help

The first and foremost concept that must be cleared is these loans are not government loans. They are insured by the government.

These types of loans were started back in the 1930's when foreclosures were rising and people couldn't raise enough capital to purchase a house.

To help expedite the process, the Fair Housing Administration was created and it provided some great tools for home purchasers.

  • It allowed a lower down payment
  • Eased some credit restrictions
  • Provided a PMI (Private Mortgage Insurance) System to help guarantee loans
  • As time progressed and changes were needed, it even reduced some of the waiting periods before applying for an FHA Loan even from Bankruptcy and other credit issues.

Not all lenders will process an FHA Loan. If, after careful research, you have determined this type of loan is what you are seeking; you must find a qualified lender that is FHA approved to begin your mortgage process.

Only a qualified FHA Appraiser can appraise a house that the Buyer is seeking FHA approval off.

Typically, the appraiser will also indicate any repairs that must be completed prior to settlement. This situation creates some very "gray" areas. The house is not the Buyers yet (pre-settlement) and yet the Buyer is arranging for and paying for repairs to be made. If the settlement doesn't go through, there will be a very obvious problem!

Depending on the value of the house and monies available, sometimes repairs can be paid for.

Closing cost may also be included in the settlement process for the Buyer, up to a certain percentage of the purchase price.

Some sellers will not allow their home to be listed with FHA Financing as an option. Many times this is because the seller doesn't want to deal with having to put a new roof on, a new furnace, windows, painting, etc.

As in all good programs, requirements change and things are updated. Be sure to again do your complete research before soliciting the type of mortgage you want. As an example, most FHA Foreclosure purchases are on a house that didn't cost too much in the first place.

That's why this program is ideal for the first time buyer. They typically can't afford too high a priced house, yet need/want a house to help build up equity. Without the FHA Loans program, this would never happen. Many first time buyers would be stuck in a loop paying for a rental house or apartment.

This program allows a purchase of a house with only 3.5% Down Payment. Depending on the economic situation and interest rates, that same house in a conventional mortgage may require 10 -20% down - that's quite a difference!

Here is a direct link to the FHA Loan Program Website.

Please be sure to understand as much as possible first.

As always, please Contact Us if you need assistance or have questions!

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