Originally developed in 1934 by Franklin Delano Roosevelt as a direct result of a housing industry that was flat on its back due to unemployment, often impossible to meet mortgage terms, and a disproportionate amount of renters, The Federal Housing Association (FHA), began offering insurance on everything from single-family homes to residential care facilities. To date, FHA has helped an astounding 46 million individuals achieve house payments that would never have been possible without this boost, even offering mortgage credit during times of recession.
What mortgage programs are available?
FHA offers a range of financing solutions to suit a full spectrum of borrowers, including first-time buyers with all types of credit, and individuals looking to refinance an existing property. While approved lenders must be used, the programs you can expect to consider if you find a mortgage broker near you include –
- Fixed-rate and potentially adjustable-rate mortgage loan programs
- Home equity conversion mortgages (HECM)
- Streamlined mortgage refinancing
- Graduated payment mortgage (GPM) (for single-family residences only)
- Energy-efficient mortgage (EEM)
In some circumstances, financing also covers living situations including mobile homes, condominiums, and refurbishment projects. You might also consider using it to refinance your current mortgage, even if it is not currently. You would first want to calculate a mortgage payoff first to ensure you have enough room to refinance first.
How do you qualify for financing?
To qualify, individuals must meet a set of criteria laid out by the agency. Though these aren’t as strict as many people believe (for instance, you don’t have to be living in a single-family residence, it can be a townhome or even a condo, they do include a range of considerations such as –
- Verifiable income
- The ability to afford house payments AND any outstanding debts
- 96.5% LTV
- An established credit rating with at least two lines of credit
- Generally, a credit score of at least 580 or greater depending on the lender
- A loan that does not exceed federally set FHA mortgage limits Etc.
What is mortgage insurance?
Flexible underwriting standards make it possible for even individuals with bad credit to take out an agency mortgage. To offset any risks, and because down payments on these loans are less, such borrowers are required to take out an agency FHA mortgage insurance. which covers the lender from loss in the case of defaults, and involves three types of mortgage insurance, which are –
- 1. Upfront mortgage insurance premiums – a percentage of the loan amount, paid when the borrower takes out the loan.
- 2. Private mortgage insurance - monthly payments that help protect the lender from default, thus allowing you to borrow greater amounts.
- 3. Annual home mortgage insurance premiums – a percentage depending on loan term, loan amount, and initial loan-to-value ratio.
These premiums may be able to be canceled after 11 years if borrowers finance 90% or less of their property and never default on payments, while loans with an LTV greater than 90% will more than likely carry insurance until debt is paid in full.
What are the benefits?
The benefits of mortgages largely speak for themselves, but some notable plus points of a borrowing option like this include –
- Higher loan to value limits
- Accessibility for low income/poor credit/ single income families, and more
- Makes it easier to gift down payments
- No repayment penalty
- And more
Are there any downsides?
While there are undeniable benefits to these mortgages, some people may find that this is not the right option for them. Professional assistance before you get a mortgage quote is best for helping you decide whether or not this is the case but, in some instances, agency mortgages do bring certain downsides, such as loan limits, a 1 time loan fee and insurance.
Who could best benefit from an FHA mortgage?
FHA mortgages were introduced to help finance properties for individuals who, for whatever reason, are unable to afford or gain acceptance for a standard mortgage program. Now, FHA loans help a wide range of individuals from all walks of life. People particularly benefiting from the agency loans right now include –
- Single-families (over 8 million)
- Individuals on low-to-mid income
- Individuals with a credit score that may not qualify for other programs
- Individuals looking to refurbish an existing property
- And more
How can MortgageQuote.com Help you?
MortgageQuote.com offers a range of mortgage solutions, including comprehensive loans on 1-4 unit dwellings for solutions that might meet your particular needs, whether you’re purchasing or refinancing. Through our customized home loan approach, we’ll work closely with you throughout the mortgage process, understanding your needs, and considering which agency subset would work best for you in the long-term. It’s this bespoke approach that sets us apart, and it could help you to start enjoying the benefits of agency loans at long last. In conclusion, when you look for a mortgage broker near me, simply apply here to discuss your options, and understand what agency loans could do for you.