FHA LoanS Explained

FHA loans are popular as they require a small 3.5% down payment and can be easier to qualify for compared to a conforming loan, as they accept much lower credit scores and relaxed asset documentation. They also have slightly lower interest rates when compared to a conventional loan.

While FHA will approve borrowers with lower credit scores, keep in mind that a lower FICO score often results in a higher interest rate.

FHA Loan Requirements:

• Only one FHA loan is allowed per borrower
• Must be owner occupied
• 3.5% minimum down payment with FICO score of 580+
• 10% minimum down payment with FICO score of 500-579
• Down payment can be a gift
• Employment for two years in the same line of work, or recent degree or training and working in the same field studied
• Bankruptcies allowed after discharged for two years
• Allows for sellers to pay up to 6% of the sales price to cover closing costs
• Are assumable - if you sell your home, new buyers can qualify to take over your mortgage in their name
• Condos must be an FHA-approved condominium project

FHA Loans Require MIP

Because government backed FHA insures the loan, borrowers are required to pay two types of mortgage insurance premiums (MIP) to insure the lender in the event the borrower defaults.

Upfront Mortgage Insurance Premium (UFMIP) is a one-time payment of 1.75% of the purchase price, that can be financed by increasing the loan amount.

FHA also requires Annual MIP, (MIP) which is charged monthly and paid in your mortgage payment. If your down payment is less than 10% on a 30 year loan, you will pay an annual MIP of 0.85%. For example, on a $400,000 loan, the monthly MIP would be $283.33 and is in place for the life of the loan.

If you can put 10% down, MIP can be removed after 11 years.

If a solid credit score and a down payment may be a stretch, FHA may be the right loan for you.



 

Term> 15 Years

 

 

Term ≤ 15 Years

Base Loan Amt.

LTV

New Annual MIP

 

Base Loan Amt.

LTV

New Annual MIP

< $625,500

< 95.00%

.80%

 

Any Amount

< 78.00 %

45 bps

< $625,500

> 95.00%

85%

 

< $625,500

78.01% - 90.00%

45 bps

> $625,500

< 95.00%

1.00%

 

< $625,500

> 90.00%

70 bps

> $625,500 > 95.00% 1.05%   > $625,500 78.01 - 90.00% 70 bps
        > $625,500 > 90.00% 95 bps

What Is An FHA Streamline Refinance?

The FHA Streamline Refinance is a special mortgage product, reserved for homeowners with existing FHA mortgages. FHA Streamline Refinances are the fastest, simplest way for FHA-insured homeowners to refinance their respective mortgages.

The FHA Streamline Refinance program's defining characteristic is that it does not require a home appraisal. Instead, the FHA will allow you to use your original purchase price as your home's current value, regardless of what your home is actually worth today.

In this way, with its FHA Streamline Refinance program, the FHA does not care if you are underwater on your mortgage. Rather, the program encourages underwater mortgages. Even if you owe twice what your home is now worth, the FHA will refinance your home without added cost or penalty.

FHA Streamline: No Verification of Job, Income, Credit, or Value!!

There's no need for a home appraisal, either, so when you put it all together, you can be (1) out-of-work, (2) without income, (3) carry a terrible credit rating and (4) have no home equity. Yet, you can still be approved for an FHA Streamline Refinance.

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Scot Presley - Presley Financial