Why a FHA loan?
First of all, the down payment required is only 3% of the purchase price of the home! Next, government loans often allow for less than perfect credit records. If you had a bankruptcy discharged over two years ago and you have established good credit since, you may qualify. FHA loans do require upfront and monthly mortgage insurance.
What is Mortgage Insurance (MI)?
There are two types of mortgage insurance on an FHA loan. The first is “Upfront” Mortgage Insurance – this is a fee that is charged when you close on your loan. It is 1.5% of the purchase price of the home. For example, if the purchase price of the home is $100,000.00, the upfront MI is $1,500.00. This money is held in an account by FHA to guarantee your loan. If you refinance or sell your home before the upfront MI is exhausted, you will receive a refund on the unused portion. The second form of MI is the premium that is paid monthly with your mortgage payment. This premium is calculated as .5% of your loan amount divided by 12. For instance, on the purchase price of $100,000.00 the monthly MI payment would be $41.67. There is no refund on the monthly MI.
FHA LOAN PROGRAMS
97% Fixed Rate Purchase – A down payment of 3% of the purchase price is required by FHA. The down payment may come from the borrowers funds or may be a gift from a relative. There are also down payment assistance programs to help borrowers meet their goal of home ownership. The interest rate on this type of financing is fixed over the life of the loan.
97% Adjustable Rate Purchase – A down payment of 3% of the purchase price is required by FHA. The down payment may come from the borrowers funds or may be a gift from a relative. There are also down payment assistance programs to help borrowers meet their goal of home ownership. With this loan the interest rate remains fixed for the first 1, 3, 5, 7, or 10 years. The rate will then adjust with the market after the initial fixed rate period, according to the terms of your loan. A low initial interest rate may help you qualify for a larger loan.
100% Streamline Refinance – Rate and Term reduction on 100% of the existing FHA loan balance. Closing costs may be rolled into the final loan amount. The only requirement is that the current mortgage has been paid on time for the previous 12 months. Existing FHA loans must be guaranteed by FHA. (*New loan amount cannot exceed original loan amount.)
90% Cash-Out Refinance – A borrower can “cash-out” up to 90% of the property’s appraised value. This money can be used for any purpose, (debt consolidation, home improvement or money for a rainy day).