What
Is An FHA Loan?
The FHA does
not make loans. It insures, in the event of a default, mortgage
loans made by approved lending institutions. FHA's analysis
of the transaction takes into consideration the applicants
income, past credit history, work history and ability to
save and manage financial affairs. Each applicant is considered
individually as no two families have exactly the same situation.
Family obligations, responsibilities, future prospects,
motivation and spending patterns all differ widely.
Advantages
of FHA Loans
-
Low down payment
-
Less cash from borrower than a conventional loan
-
Less stringent loan underwriting guidelines
-
Fully assumable (with qualifying)
-
No prepayment penalty
|
Eligibility
Requirements
FHA financing
may be by any qualified person, whether a U.S. citizen or
not. However, the property must be the occupying borrowers
principal residence. The borrower must also have a social
security number.
FHA Mortgage
Insurance
Mortgage insurance
is required on all FHA loans. The insurance is collected
by the lender and paid to FHA, who in turn reimburses lenders
in the event of loan defaults.
- MMI
& MIP are the two existing types of
FHA insurance.
- MMI
(Mutual Mortgage Insurance) is collected monthly
on approved Condominiums. Insurance is paid on the
remaining balance of the loan only, therefore the
payments will decrease gradually over the life of
the loan.
- MIP
(Mortgage Insurance Premium) is a one-time premium
calculated as a percentage of the loan amount that
applies to Single Family Residences (SFR) and Planned
Unit
- Developments
(PUD). This fee can be 100% financed and
added to the base loan.
|
FHA Loan
Programs And Amounts
The maximum FHA
loan amount varies by county.
The three programs
available are the 30-year fixed/level payment where the
monthly principle and interest payment remains the same
for the life of the loan, the one-year
- ARM
(Adjustable Rate Mortgage) which can fluctuate based
on the index (1-year Treasury Bill) and has a 1%
annual cap and a 5% lifetime cap, and the
- GPM
(Graduated Payment Mortgage) which allows the borrower
to qualify at a lower rate but requires a down payment
and has negative amortization.
|
Interest
Rates
FHA does not
set interest rates. Rates reflect current market conditions.
Discount points need not be paid by anyone, but discount
points to obtain a lower than market rate can be paid by
either the buyer or the seller.
FHA Appraisals
FHA uses the
same appraisals for all programs. The appraisals (or Conditional
Commitments) are done by FHA assigned/approved appraisers
and set forth FHA's estimate of value. If the appraisal
is at a value lower than requested, a reconsideration of
value may be requested by sending FHA recent comparables
indicating a higher value, or the buyer may pay the additional
difference.
Cosigners
FHA allows a
borrower to use a non-occupying cosigner for purposes of
qualifying for the loan. The co-signer's income, assets,
liabilities and credit history are included in the determination
of credit worthiness. The co-signer must be a blood relative,
or for unrelated individual, documented evidence of a family-type,
long-standing and substantial relationship not arising out
of the loan transaction.
Buyer's
Costs
- Down
Payment
-
Loan Origination Fee (1% of base loan amount)
-
Escrow Fee
-
Appraisal Fee
-
Credit Report Fee
-
Recording Fees
-
ALTA. Lenders Title Insurance Policy
-
Property Tax Proration and Reserves
-
MMI Impounds (2 months)
-
MIP (can be 100% financed and added to base loan)
-
Hazard Insurance and Reserves
-
Per Diem interest on new loan, based on closing
date
|
Seller's
Costs
- Escrow
Fees
-
Sub-Escrow Fee*
-
Tax Service Fee*
-
Revenue Tax Stamps ($1.10 per $1000 sale price,
if applicable)
-
Standard Owner's Title Insurance Policy
-
Proration of Property Taxes
-
Payment of assessments, etc.
-
Structural Pest Control Inspection and Repairs
-
Pay Off Existing Trust Deed and Liens
-
Broker fees
-
Association Transfer Fees*
-
Buyers' Loan Processing Fee*
-
Buyers' Loan Document Fee*
|
