Michele's Blog

Rates have continued to decline during the summer months.  What you've seen in the news is true- rates are incredible right now, and this is driving quite a lot of "interest" in home financing.  However, it doesn't mean everyone has 20% to put down, or stellar credit scores.  In these situations, FHA is a powerful option.

 

Since there have been some recent announcements regarding FHA programs, I thought it may be a good time to highlight this program.

 

What is FHA?
If you are not already familiar with Federal Housing Administration (FHA) financing, these are residential loans insured by FHA and guaranteed as mortgage-backed securities (MBS) by the US government through GNMA www.ginniemae.gov

 

FHA lenders typically offer great rates and straightforward qualifying.  I am certified to consult on and originate FHA loans, and our office has been processing FHA loans since 1982, which makes up  40% of our volume.
 
Why FHA?
Here are just a few of the highlights of FHA loans:

• FHA allows for as little as 3.5% down payment, and funds may come from a gift.
• Loan amounts up to $729,750.
• Credit scores as low as 620.
• Cosigner/Co borrowers are allowed to help qualify.
• It is possible to close an FHA loan in 30 day - 45 days.
• Property can be taken "as is".
• The seller can, if negotiated pay up to 6% credit towards non-recurring closing costs, recurring closing costs and/or up front mortgage insurance premium.
• Can be useful for refinancing if equity is tight, even negative.

New FHA MI (Mortgage Insurance) Requirements Coming Soon
FHA does require up-front and monthly mortgage insurance premiums to compensate for higher risk.  For loans greater than 15 years starting on or after October 4th, the FHA upfront MI will decrease and the monthly MI will increase.  The net effect of these changes will be a lower total loan amount and a higher overall monthly obligation until the equity reaches 80% (78% if you don't ask), when the monthly MI can be removed.

 

If you or someone you know would like to learn more or make some comparisons, I would love to talk with you!  I can be reached at 408-626-1879.