FHA- Federal Housing Administration-FHA is a government program.FHA is extremely popular among 1st time home-buyers and previous home owners.There is no limit on how many times you may use FHA.The FHA was created by Congress in 1934.Its purpose was to generate new jobs through increased construction activity and to promote the financing and sale of real estate nationwide.Alliance Mortgage is a DIRECT F.H.A. Lender and is endorsed by FHA.
FHA Insures Loans - Today the FHA is a part of the department of Housing and Urban Development, and its function is to insure loans made by the lender against losses that could result from borrower default.The FHA does not build homes, nor does it make loans.The FHA is a giant federal insurance agency.Its insurance program is called the mutual mortgage insurance plan.Under this plan, lenders who have been approved by the FHA to make insured loans, either submit prospective borrowers and properties to the local FHA office for approval or perform the underwriting functions themselves (i.e., review of appraisal, credit examination, etc.)
FHA ASSUMES LIABILITY - As the insurer, the FHA incurs full liability for losses resulting from default and property foreclosure.In turn, the FHA regulates many of the conditions of the loan.FHA regulations have the force and effect of law, and they have done much to shape the face of the real estate lending industry.FHA Loans are commonly used to help people buy homes.An applicant can purchase a 1-4 family home as long as it will be a primary residence.No second homes or investor homes are allowed.
FHA overview -The qualifying guidelines are less restrictive, in fact, the qualifying income ratios are 31/43, higher than the conventional 28/36 ratios.This means that your mortgage payment can not be any higher than 31% of your Gross Monthly Income and your mortgage payment plus all revolving or installment debt (credit cards, car loans, etc.) can not exceed 41% of your Gross Monthly Income.This "stretch" in ratios, allows for the applicant to afford a little more home and with a little more debt.The FHA is more lenient on credit.Some 1st time homebuyer programs have income restrictions, but the FHA has no income limit.The FHA does have a maximum loan amount, this will vary from county to county (visit our web site for your county maximum).FHA allows customers to finance a 1 to 4 unit home as long as the dwelling will be a primary home.
Down Payment is 3%.The seller can contribute up to 6% toward the closing costs.A GIFT from a family member may be used to pay for the entire down payment and closing costs.
MORTGAGE INSURANCE PREMIUM (MIP) is financed on top of the base loan amount.FHA loans require an applicant to pay a Mortgage Insurance Premium (MIP).This premium is 1.50% of the base mortgage amount and may be financed on top of the maximum mortgage amount.In addition, there is a monthly MIP cost.This is 0.50% of the mortgage amount prior to financing the MIP and is included in your mortgage payment.
CREDIT:A period of financial difficulty in the past does not necessarily make the risk unacceptable if a good payment history has been maintained since.Minor derogatory credit occurring two or more years in the past usually does not require an explanation.Neither the lack of credit history nor the borrower's decision not to use credit may be used to reflect a FHA loan.You may develop a credit history from utility payments, rental payments and automobile insurance payments.The hierarchy of credit evaluation is the manner of payments made on previous housing expenses, including utilities, followed by the payment history or installment debts, then revolving accounts.Generally, an individual with NO late housing or installment debt payment should be considered as having an acceptable credit history unless there is major derogatory credit on the revolving accounts.Bankruptcies will not disqualify the borrower if at least TWO years (not four as with Conventional loans) have passed since the discharge AND the borrower has re-established good credit (or has chosen not to incur new credit obligations).A bankruptcy of less than two years (not less than 12 months) may be acceptable if the bankruptcy was caused by extenuating circumstances.
Dan Palumbo, FHA specialist and Licensed Mortgage Banker1-800-817-8743
Equal Housing Opportunity
DAN PALUMBO, Licensed Mortgage Banker ALLIANCE FINANCIAL NETWORK - DAN PALUMBO
