What Are the Benefits of Getting an FHA Loan When buying or Refinancing Home

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For a certain amount of years, FHA loans weren’t as popular as they have been previously. However, since 2005, FHA loans have been on the rebound.The Department of Housing & Urban Development brought the Federal Housing Administration (FHA) under its umbrella in 1965, while the FHA itself has been around since June 27, 1934.

The reason that FHA loans became unpopular in the late 1990s was because the value of many homes had risen and surpassed the FHA mortgage limits set at that time.

Also, sellers did not like the FHA’s strict guidelines for appraisals.

What Are the Benefits of Getting an FHA Loan When buying or Refinancing Home

HOW DO FHA LOANS WORK?

The FHA itself doesn’t create loans or offer guarantees for loans. What is does do is insure the loans. That fact becomes attractive to lenders because the level of insurance offered completely removes or reduces the risk of buyers defaulting on their loans after they make down payments that are less than 20% of the purchase price of the home.

FHA-approved lenders are authorized to take and process loan applications, as well as underwrite the loans and close the loans.

THE MORTGAGE LIMITS OF FHA LOANS

Back in 1955, you could purchase a home for $9,000 with an FHA loan. It’s a thought almost unthinkable, considering housing prices as they’ve risen over the years.

As such, the FHA occasionally changes its mortgage limitations to represent factors that include the area in question. Find out your limit here on the HUD.gov U.S. Department of Housing and Urban Development website.

Effective January 1, 2009, the maximum mortgage limit in high-cost areas has been set to 115% of local median prices. This amount should not exceed $625,500. For single-family residences across the nation, the maximum conforming loan limit goes down to $417,000 – however, your specific area may support a lower mortgage limit.

BAD CREDIT? AN FHA LOAN MIGHT BE YOUR ANSWER

Just in case there are blemishes on your credit report due to financially trying times that may have caused negative items to lower your FICO scores, an FHA might be the loan for you in spite of the issues.
Don’t despair if you’ve had financial worries in the past, because you might still be able to qualify for an FHA loan. With FHA loans, FICO scores are allowed to be lower than the ones traditionally approved for standard loans.
Even if you’ve suffered a bankruptcy, you may still be able to receive an FHA loan two to three years after the date that your bankruptcy was discharged, under the condition that you’ve maintained good credit since the time at which your debts were discharged.

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Negative experiences like foreclosures need not necessarily stop you from obtaining a new home via an FHA loan, either. As long as you’ve been able to keep your credit report in great shape after the foreclosure, an FHA loan will be an option for you two to three years after the final listed date of your foreclosure.

GET GREAT RATES AND TERMS WITH FHA LOANS

The current terms these days for FHA loans are relatively straightforward. In fact, in plenty of cases and across markets, the rates and terms for FHA loans are more favorable than the 80%/20% piggyback loan rates.
Also, there isn’t much adjustment – if any at all – to an FHA loan’s interest rate, because the rates vary within .125 percent of a conventional loan.

As far as mortgage insurance goes, it is funded into the loan, which means a 1.5% premium is added onto the loan balance – so that amount doesn’t have to be paid out-of-pocket.

Although a minute part of the mortgage insurance premium is tacked onto the monthly payment, it is much less than the amount of private mortgage insurance premiums.

Since January 1, 2009, borrowers have been allowed to finance 96.5% of the purchase price and put down 3.5 %, much less than the standard 20% down payment required for other types of mortgage loans. This means that a down payment can actually equal $0 at times – at least in those cases when it’s been combined with other types of loans.

Another benefit to FHA loans comes into play with consumers who have a high debt-ratio limit, as witnessed by their credit reports. FHA loans allow for higher debt-ratio limits than other conventional loans.

FEWER REPAIRS WITH FHA LOANS

There was a point in time when FHA repair demands grew in such abundance that sellers would discount the listing price of the residence in question to buyers who agreed to eschew FHA loans in favor of conventional loans.

As a result, the FHA repair guidelines have been adapted to appear more reasonable. Things like broken roofs that leak elements like rainwater or snow still are required to be replaced, however, older roofs don’t automatically necessitate getting a new one to replace it if there is no leakage involved.Sticky windows or ones with cracked panes don’t have to be replaced either.

Merely because an FHA appraisal has been completed on a residence, don’t assume that it can replace a quality home inspection. Prospective buyers should always seek to obtain a professional home inspection to root out any problems before committing to purchase a new home.

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The major attractive thing about FHA loans beyond those facts listed above is that they are available to all, but are mostly used by those buying their first home – or people with low to moderate income levels.Yet and still, FHA loans have no income limit qualifications.

Tag : fha loan , fha loan rates , fha loan calculator , fha home loan , fha loan guidelines , what is fha loan , how to qualify for fha loan

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What Are the Benefits of Getting an FHA Loan When buying or Refinancing Home
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