Established in 1934, the FHA helps borrowers obtain mortgages for which they would otherwise have trouble qualifying. Typical problems that the FHA helps borrowers overcome include: poor credit; low cash reserves; lack of employment history; reduced income.
An FHA loan is a mortgage issued by any federally qualified lender that is insured by the Federal Housing Authority against default by the borrower. The FHA is not the lender. Nor does it have anything to do with rates. These are in the purview of the actual lender.
With the end of the Subprime era, FHA loans have become increasingly popular. Because of their generous underwriting requirements and the government’s guarantee, FHA loans are favored by lenders.
You can secure an FHA loan for a purchase or for a refinance, including one that lets you take cash out of your property. Although the property must be a primary residence, that home can be a single family house, condo, coop, townhouse, duplex, triplex or 4 unit building.
Benefits of FHA loans include easier credit qualifying guidelines than most lenders allow, comparable closing costs, and much lower down payment requirements. Your down payment can be as low as 3.5% of the purchase price. Closing costs can be included in loan amount. Interest rates often start lower than conventional loans, although this varies with market conditions.
One disadvantage of the FHA approach is the requirement to carry mortgage insurance (MI). One disadvantage of the FHA loan is its requirement to carry mortgage insurance (MI) This insurance has two components. 1) There is an upfront payment of 1.75% of the loan amount. This is often added to the loan amount and paid throughout the life of the loan. 2) You will pay each month a mortgage insurance premium of 0.5% of the loan amount. For example, on a $200,000 loan, the monthly premium is $83. This fee lasts for 5 years or until the loan balance is less than 80% of the property value – whichever comes last. Your loan-to-value is reduced either because you make payments to the principal and/or because market changes increase your home’s value. This can be included in the loan amount and paid throughout the life of the loan. If the loan-to-value exceeds 90%, you will also pay an annual mortgage insurance premium of 0.5% until the loan balance falls back below 90%. This may happen as a result of your payments towards principle reducing the ratio or due to market value increases in your home raising your equity.
Mortgage Los Angeles | Mortgage Orange County | Mortage West Los Angeles | Mortgage Santa Monica | Mortgage Pacific Palisades | Mortgage Malibu | Mortgage Beverly Hills | Mortgage Brentwood | Mortage Culver City | Mortgage Mar Vista Mortgage Marina Del Rey | Mortgage Torrance | Mortgage Palos Verdes | Mortgage Long Beach | Mortgage Sherman Oaks | Mortgage Encino.
