FHA
Loan Facts
What does FHA
have for you?
Buying
your
first home?
FHA might be just what you need. Your down payment can be as low as 3%
of the purchase price, and most of your closing costs and fees can be
included in the loan. Available on 1-4 unit properties.
more info
Want
a
fixer-upper?
FHA has a loan that allows you to buy a home, fix it up, and include
all the costs in one loan. Or, if you own a home that you want to
re-model or repair, you can refinance what you owe and add the cost of
repairs - all in one loan.
more info
Financial
help for seniors
Are you 62 or older? Do you live in your home? Do you own it outright
or have a low loan balance? If you can answer "yes" to all of these
questions, then the FHA Reverse Mortgage might be right for you. It
lets you convert a portion of your equity into cash.
more info
Want
to make
your home more energy efficient?
You can include the costs of energy improvements into an FHA
Energy-Efficient Mortgage.
more
info
What FHA
program allows me to pay my mortgage off early?
The
Growing Equity Mortgage (GEM) is a graduated payment mortgage (GPM)
that provides for rapid principal payment and a shorter mortgage term
by increasing payments over a period of time. Scheduled increases in
monthly payments are applied directly to the principal, allowing a
shorter term than a GPM or a level payment mortgage. There is no
interest deferral or negative amortization with a GEM. The total cost
of the mortgage will be reduced because the balance is paid off sooner.
Mortgages are insured under Section 203(b), 203(k), or 234(c), pursuant
to Section 245(a). Requirements of the appropriate section must be met.
Does
FHA have
special programs for Veterans?
FHA provides additional financing opportunities to
qualified veterans. The three percent cash investment requirement does
not apply to borrowers who are veterans and, under certain
circumstances, this veteran's preference may result in a significant
reduction to the cash needed to close the mortgage.
For those eligible veterans whose property seller will pay all the
closing costs, or choose to use premium pricing for settlement charges,
or some combination of both, the cash settlement reduction can be
substantial. This cash reduction will always be equal to the difference
between the maximum loan-to-value (LTV) limit, which varies according
to sales price and the State where the property is located, and 97
percent (the reciprocal of the 3 percent cash investment requirement)
multiplied by the sales price (or appraised value, if less). As the
amount of borrower-paid closing costs increase, the benefit diminishes.
FHA's program supplements but does not supplant the VA entitlement
programs. This additional mortgage financing opportunity being provided
by FHA may directly benefit:
- Veterans with less than full eligibility for a
VA guaranteed loan
- Veterans who are co-borrowers with someone
other than a spouse
- Veterans whose eligibility is tied up until a
loan that was assumed is paid off or the veteran is released from all
liability
- Veterans re-using their eligibility and whose
new
loan under VA may have a funding fee greater than FHA's mortgage
insurance premium
What is the
primary FHA rehabilitation mortgage insurance program?
The Section 203(k) Rehabilitation Mortgage
Insurance
Program allows individuals or families to purchase or refinance and
rehabilitate a home that is at least one year old with a single
mortgage loan. A portion of the loan proceeds are set aside in an
escrow account and released as rehabilitation is completed.
The cost of the rehabilitation must be at least $5,000 and the total
mortgage amount on the property, including the cost of the repairs,
must fall within the Federal Housing Administration (FHA) mortgage
limit for the area. The extent of the rehabilitation covered by Section
203(k) insurance may range from relatively minor (though exceeding
$5000 in cost) to virtual reconstruction provided that the existing
foundation system remains in place.
The types of improvements that borrowers may make using Section 203(k)
financing include:
- structural alterations and reconstruction.
- modernization and improvements to the home's
function.
- elimination of health and safety hazards.
- changes that improve appearance and eliminate
obsolescence.
- reconditioning or replacing plumbing;
installing a well and/or septic system.
- adding or replacing roofing, gutters, and
downspouts.
- adding or replacing floors and/or floor
treatments.
- major landscape work and site improvements.
- enhancing accessibility for a disabled person.
- making energy conservation improvements.
HUD requires that properties financed under this program meet certain
basic energy efficiency and structural standards. However, luxury items
and improvements that do not become a permanent part of the property
are not eligible uses of a 203(k) loan.
What are the
counseling requirements on an FHA reverse mortgage?
Housing counseling is required on a HECM mortgage before the borrower
incurs any costs for this loan. Lenders must advise borrowers of the
names of counseling agencies in the area. The counseling may be face to
face or by telephone. Lenders may not recommend a specific counseling
agency.
What programs
are available for outlying areas?
The 203(i) Mortgage Insurance for Outlying Areas program serves
individuals purchasing homes in outlying areas, where lack of a normal
market could make resale in case of default difficult. This program is
used to finance the purchase of proposed, under-construction, or
existing one-family housing, or new farm housing on 2 ½ or
more
acres adjacent to an all-weather public road.
To make sure that its programs serve low- and moderate-income people,
FHA sets limits on the dollar value of the mortgage loan. The current
limit for a one-family home under this program is 75 percent of the
loan limit under the standard FHA mortgage insurance program. This
reduction in the mortgage limits makes the FHA 203(b) mortgage program
more widely used when available. For more information on Section 203(i)
Mortgage Insurance for Outlying Areas, please visit the referenced web
site. |
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