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What is an FHA Loan?  | FHASecure | Email this page

You've heard the name before, but did you know that FHA financing is one of the most popular ways to become a homeowner or refinance an existing mortgage. FHA's mortgage insurance programs help low- and moderate-income families become homeowners by lowering some of the costs of their mortgage loans. FHA mortgage insurance also encourages mortgage companies to make loans to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, by protecting the mortgage company against loan default on mortgages for properties that meet certain minimum requirements--including manufactured homes, single-family and multifamily properties. We are a top provider of FHA Home Loans in Minnesota, Wisconsin, and Florida.

FHA LOANS vs. Conventional Financing (like Flex 97)

Find out why more and more people are turning back to FHA!
Although there are similarities between FHA and Conventional mortgage loans there are also some big differences. While interest rates are similar, credit guidelines are different. FHA allows for borrowers with less than perfect credit to receive the same interest rate as a borrower with unblemished credit. Low down payment conventional financing, like FLEX 97, are much harder to qualify for these days. Minimum credit scores are much higher, and private mortgage insurance is double the cost of FHA.

Most applicants are inundated with a variety of terms describing mortgages that are available on the market. The most popular include, Conforming, FHA, and VA.

FHA was created by the Federal Government to provide affordable housing financing for qualified borrowers. FHA insures to 100% of the loan, eliminating the lender's risk. The borrower pays a small upfront insurance premium, called MIP, which is added to the loan amount. The borrower also pays a monthly premium of .5% of the loan amount divided by 12 months. FHA REQUIRES only a 2.25% down payment but also requires you spend a total of 3% out of pocket once you factor in closing costs. This money can be a gift from a blood relative, of true community, state, or city program. No reserves are required. There are also Closing costs which need to be paid, but almost 100% of the time, these closing costs can be financed into the loan amount by having the seller pay them. Seller paid closing costs really is simply a fancy term by which you are allowed to "roll" your closing costs into the loan, and pay them over the life of the loan, versus having to come up with the money today out of pocket.

Borrowers must provide proof of sufficient income to show ability to pay the mortgage. FHA guidelines are more relaxed, such as; a bankruptcy that was discharged at least 2 years ago, the use of alternative credit (utilities, cable TV, auto or medical insurance premiums, child care, school tuition, furniture or appliance store accounts) in lieu of traditional credit, and higher debt to income ratios. FHA interest rates are extremely competitive with conventional rates.

We are an Official HUD Certified (Department of Housing and Urban Development) FHA Provider for Minnesota, Wisconsin, and Florida.

Maximum Loan Amounts Vary By County and State. Find out your limit with our FREE FHA LOAN LIMIT Lookup Tool

Buy a home with a $100 down payment! Call me to learn about The $100 down HUD / FHA REPO Loan

FHA Home Loan Down payment requirements can be low. In contrast to conventional mortgage products, which frequently require down payments of 5-10 percent or more of the purchase price of the home, single-family mortgages insured by FHA make it possible to reduce down payments to as little as 2.25% percent.

FHA closing costs can be financed, up to 6% of the purchase price. With most conventional loans, the maximum is just 3%. Typically borrower must pay, at the time of purchase, closing costs (the many fees and charges associated with buying a home). This program allows the borrower to finance many of these charges, thus reducing the up-front cost of buying a home. FHA mortgage insurance is not free: borrowers pay an up-front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.

The FHASecure Initiative. This new initiative was designed in the fall of 2007 in an effort to help some people facing foreclosure. Under traditional FHA guidelines, FHA did not provide financing for people who have had recent late payments - especially late mortgage payments. Under the new FHASecure program, you still need to "qualify", but FHA will disregard late payments for qualifying if the conditions below are met. Who Should Use the FHASecure Refinance Program? If you are match any of these statements, the FHASecure Loan maybe able to help you. Currently late and behind on mortgage payments? Interest rate increase has caused you to go into mortgage default or foreclosure? Have little or no equity in your home? If any of the above is your current situation, then the FHASecure loan may allow you to refinance your home at competitive mortgage rates even if other mortgage lenders have said no. Below is the FHASecure loan qualification guidelines. FHA Secure Refinance Program Guidelines In order for homeowners to qualify for the FHA Secure home loan refinance, you must meet all of the following five FHA Secure refinance criteria: You have a NON FHA adjustable (ARM) mortgage You were current on your mortgage before your rate adjusted All your late payments are AFTER your loan rate adjusted Your mortgage interest rate must have or will reset between June 2005 and December 2009. You must have three percent cash or three percent equity in the home. You must have a credit history of on-time home mortgage payments before your mortgage teaser rates expired and home loan reset; A sustained history of employment for last two years Sufficient income to make the new FHA Secure mortgage payment. New mortgage loan amount cannot exceed current FHA loan limits. The new FHA Secure refinance program will require an escrow impound account for property taxes and insurance as well as FHA MIP - mortgage insurance premium to be included in new mortgage payment. All FHA Secure home loans will not have any mortgage pre-payment penalties as is traditional with FHA loans. If you meet the required guidelines you may request additional information regarding this FHA Secure loan program. If you know of any family, friends, or co-workers that my be benefit from the FHA Secure mortgage program, let them know by Emailing this page to them. FHASecure Refinance Program Information Request Please complete the following FHASecure loan information request and we will contact you within about 24-hrs. (excluding weekends). If  you want to get pre-approved online for the FHASecure refinance, please go here. There are no costs or obligations to APPLY and get answers!

Some fees are limited. FHA rules impose limits on some of the fees that mortgage companies may charge in making a loan. For example, the loan origination fee charged by the mortgage company for the administrative cost of processing the loan may not exceed one percent of the amount of the mortgage.

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HUD FHA Loan Limits. Limits on the loan amount. To make sure that its programs serve low and moderate-income people, FHA sets limits on the dollar value of the mortgage loan. It is always changing, and does vary depending on which county the property is located. Use our FREE Loan Limit Lookup Tool to find out the limits in your area.

Fannie Mae & Freddie Mac loans are conventional loans made at the risk of the lender without benefit of any government guarantee or government insurance. A conventional loan with an LTV (loan to value ratio) of greater than 80% requires primary mortgage insurance, which can be paid monthly. The borrower must (usually) have 5% of his/her own funds for the down payment. There are still some 3% down conventional loans, but they are super hard to qualify for.

Requirements of a conventional loan applicant include excellent credit, job stability with sufficient income, a sizable down payment, and low debt to income ratios. Borrowers who meet Fannie Mae or Freddie Mac conventional guidelines are rewarded with an interest rate only slightly lower than an FHA interest rate.

FHA Mortgage Insurance. Mortgage insurance is required under all programs where the borrower does not put at least 20% down payment. Under the OLD FHA rules, mortgage insurance was required for the entire loan period. Conventional loans are able to eliminate mortgage insurance when you reach 80% loan-to-value (20% equity). A BIG advantage over FHA. NOT ANYMORE! FHA mortgage insurance is eliminated when you get to 78% loan-to-value (22% equity) by making payments, just like conventional loans!

The FHA Streamline Refinance
If you currently have an FHA mortgage you are eligible for one of the simplest money saving refinances available today. The FHA Streamline Refinance allows existing FHA borrowers to reduce their interest rate without having to jump through hoops. Basically, if you have made on time payments on your current FHA loan for the past 12 months. You get (almost) an automatic approval for the streamline refinance!

Non-conforming Bad Credit, Sub-prime, Alt-A Loans Gone
Lenders, and the crazy lender days from 2000 - 2006 are long gone. Bad credit, sub-prime, stated income, no doc, Alt-A, and everything else crazy is no longer available. FHA is your best option if you are a weak credit risk, but it is NOT a bad credit loan. You have to qualify, it has to make sense, and you have to have a little skin in the game (down payment).

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