Benefits of the Federal Housing Administration
FHA LOW MONEY DOWN Why FHA??
FHA (Federal Housing Administration) is one of the best loan programs for buyers today and is part of HUD (Housing and Urban Development). The FHA loan was developed for homeowners to secure affordable loans to purchase homes. For many years, the FHA has been the backbone for homeowners in America.
NOTE: If you had a foreclosure in your past, FHA will require 3 years from the foreclosure date before proving you a home loan. If you had a foreclosure on an FHA home loan, you will need to wait 3 years from the date the FHA paid the initial claim to the lender who foreclosed.
Let’s see if an FHA loan is the best Loan for you!
The FHA (Federal Housing Administration) has several types of loans that allow borrowers to refinance their home. Borrowers can refinance a current FHA loan with an FHA Streamline Refinance, refinance a different type of home loan with an FHA Rate and Term Refinance, or use the FHA Cash Out Refinance to take cash out of their home.
The FHA Streamline loan allows borrowers to refinance their existing FHA loan to reduce the monthly payments with relaxed loan requirements. Most FHA Streamline Refinances do not require an appraisal, so this loan is very attractive to many FHA borrowers who are upside down with their current FHA mortgage. The FHA wants the borrower to have the lowest interest rate and payment possible.
The FHA requires the refinance to save at least 5% on their monthly mortgage payment (PITIMI). Refinancing from a 30 year to a 15-year mortgage is not a benefit to borrower in the eyes of the FHA under the FHA Streamline loan. The FHA Streamline is the only FHA loan that will allow borrowers to refinance a 2nd home and investment properties that currently have an FHA loan on them. FHA Streamline loans normally require reduced documentation for the loan process. The closing costs for the loan cannot be “rolled” into the loan. Most lenders will pay the closing cost (slightly higher interest rate) for the borrower, or the borrower can bring these closing costs to closing.
The FHA Rate and Term refinance loan is designed to refinance an existing home loan into an FHA loan. A borrower can refinance any type of home loan to an FHA loan and include the closing costs and pre-paid items for the home loan. The loan is limited to 97.5% LTV (Loan to Value) based on a new FHA appraisal. These loans require full documentation. The lender will look at the borrower’s income, assets and credit. The borrower must live in the property as their primary home.
The FHA Cash Out loan lets a borrower take up to 80% of their home’s equity to pay off debt, 2nd mortgages, or just have cash in hand. These loans are only available on primary residence properties. They do not have to have an FHA loan on the property to do an FHA Cash Out loan. This is a full-documentation loan, and the lender will require a new FHA appraisal and income, asset and credit verifications.
FHA does not have a minimum credit score for their loans. Each lender can have their own minimum credit score. FHA does require that borrowers who have less than a 620 credit score to have a Debt to Income Ratio that does not exceed 45%.