What is the Federal Housing Association?
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 with FHA?
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 FHA-approved lenders must be used, the programs you can expect to consider if you find an FHA mortgage broker near you include –
- Fixed-rate and adjustable-rate FHA mortgage loan programs
- Home equity conversion mortgages (HECM)
- Streamlined FHA mortgage refinancing
- Graduated payment mortgage (GPM) (for single-family residences only)
- Energy-efficient mortgage (EEM)
In some circumstances, FHA financing also covers living situations including mobile homes, condominiums, and refurbishment projects. You might also consider using FHA to refinance your current mortgage, even if it is not currently FHA. You would first want to calculate a mortgage payoff first to ensure you have enough room to refinance first.
How do you qualify for FHA financing?
To qualify, individuals must meet a set of criteria laid out by the FHA themselves. Though these aren’t as strict as many people believe (for instance, you don’t have to be living in a single-family residence/first time buyers, etc.,) they do include a range of considerations such as –
- Verifiable income
- The ability to afford house payments AND any outstanding debts
- A 3.5% down payment
- An established credit rating with at least two lines of credit
- Generally, a credit score of at least 580-640 depending on the lender
- A loan that does not exceed federally set FHA mortgage limits Etc.
What is FHA mortgage insurance?
Flexible underwriting standards make it possible for even individuals with bad credit to take out an FHA mortgage. To offset any risks, and because down payments on these loans are less than 20%, such borrowers are required to take out FHA mortgage insurance, which covers the lender from loss in the case of defaults, and involves two types of mortgage insurance, which are –
- 1.Upfront mortgage insurance premiums – 1.75% of the loan amount, paid when the borrower takes out the loan.
- 2.Annual mortgage insurance premiums – 0.45-1.05% depending on loan term, loan amount, and initial loan-to-value ratio.
These premiums are 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 carry insurance until debt is paid in full.
What are the benefits of FHA mortgages?
The benefits of FHA mortgages largely speak for themselves, but some notable plus points of a borrowing option like this include –
- Smaller down payments
- Accessibility for low income/poor credit/ single income families, and more
- Makes it easier to gift down payments
- No repayment penalty
- Assumable loans
- And more
Are there any downsides to FHA mortgages?
While there are undeniable benefits to FHA 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, FHA mortgages do bring certain downsides, such as loan limits, a 1 time mortgage loan fee and mortgage 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 FHA loans right now include –
- Single-families (over 8 million)
- Individuals on low-to-mid income
- Individuals with a credit score less than 620
- 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 FHA 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 FHA 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 FHA loans at long last. Simply apply here to discuss your options, and understand what FHA loans could do for you.