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FHA Mortgages and Loans
FHA Connecticut mortgages
and loans for real estate purchase, refinancing, debt consolidation, rehabs,
real estate investment. FHA low down payments make it easy to afford a home.
Government guarantees, PMI rebates, and easy qualifying guidelines make the FHA
mortgage a key to opening the home of your dreams.
- FHA Mortgages for Refinancing – Refinance up to 97% LTV. Save many, many thousands of dollars on interest payments by refinancing to a lower rate mortgage. Pay off high interest non tax deductible credit card debt. Refi and rehab. Take cash out for what ever reason. FHA 203b and FHA 203k. PMI premium refunds (yes, actual refunds from the government)
- FHA Mortgages for Buying a Home – 3% down payment. Finance your closing costs. Buy and renovate. Usually the single best investment that you can make. One – four units. Finance up to 6 months of payments. Usually assumable. FHA 203b and FHA 203k.
- FHA Mortgages for Buy and Rehab - Rehab Construction loans. Mortgage LTV to 98.15% based on completed value of project. No payments during building rehab phase (up to 6 months). FHA 203k.
- FHA Fixed Rate Mortgages – 30 and 15 year terms. 3% down. One – four units.
- FHA Adjustable Rate Mortgages - Periodic and life time caps on interest. Conversion options to a fixed rate mortgage. 3% down payment.
- FHA Graduated Payment Mortgages - Reduce your initial mortgage payments. Qualify for a larger loan and a bigger home. Convert to a fixed rate 30 year term mortgage at any time.
FHA Mortgages Explained
The FHA mortgage program was established by the government in 1934 to improve the existing housing standards and conditions. Before this time, home buyers usually had to have at least 50% of the total cost of the house as down payment, and payments were only stretched out between 1-5 years. FHA stands for Federal Housing Administration, which is a government corporation established strictly for improved housing conditions for Americans.
An FHA mortgage can be an attractive proposition for many first time homebuyers, as down payment requirements for an FHA mortgage can be as low as 3%. However, FHA mortgages can be taken out by any homebuyer, whether this is their first house or not. The only stipulation is that a purchaser can only have one FHA mortgage at a time.
How an FHA Mortgage Works
The FHA does not lend the money to a buyer, it simply insures that the total mortgage will be paid to the lender in the event that the buyer defaults. It is always up to the private lender (bank, credit union, savings and loan) to decide whether or not they will lend the money.
The FHA mortgage program tends to be more forgiving than conventional mortgages in terms of past credit history. A bankruptcy discharged as little as two years ago may not hinder a homebuyer from qualifying for the FHA program.
FHA mortgages typically do not require the homebuyer to pay more than 3-5% of the total mortgage amount as down payment. Unlike traditional loans, this money may also be a gift to the homebuyer, and does not need to be secured as the homebuyer's own money. Often, there are "points" associated with the FHA mortgage that are usually worth about 1% of the total mortgage value. These points are paid to lenders in order to help lower the interest rate of the mortgage.
Borrowers will also have to pay PMI (private mortgage insurance) on the mortgage. PMI is used to insure the total of the mortgage will be paid in the instance of a default. A PMI usually will be put into effect until 20% of the mortgage has been paid off.
FHA mortgages are known to have no mortgage value cap. In other words, you can take out an FHA mortgage for $150,000 to $300,000 and up without any restrictions other than your credit applicability.
Closing costs on FHA (or conventional loans) usually run between 2-3% of the total mortgage amount and are the responsibility of the buyer. However, they can be financed into the total amount of the mortgage and paid off accordingly.
Qualifying For an FHA Mortgage
First of all, to be approved for an FHA mortgage, you must first have a satisfactory credit history showing your commitment to maintaining and paying off debts in a timely manner. There are also relatively strict income requirements, and you must be able to prove that the total monthly mortgage payment will be less than 29% of your monthly income. The number arrived at after multiplying your total monthly income with 29% is referred to as PITI. The PITI amount is the highest amount that your monthly mortgage payments can be, and this includes principle, interest, property taxes, and insurance. As well, your total long term debt (car loans, credit card balances, etc.) added with the monthly PITI cannot be more than 41% of your total monthly income.
While these numbers may seem a little stringent, they are actually more lenient than traditional mortgages. Combining the decreased down payment amount required with an FHA mortgage, this type of mortgage becomes even more desirable for many people.
Fixed rate mortgages, or Section 203(b), are the most typical and popular type of FHA mortgage. A fixed mortgage is one in which the interest rate does not change. A fixed rate FHA mortgage insures the total amount of the mortgage against default to the lender. This type of mortgage also requires very little in the way of down payment, as opposed to a conventional mortgage. The typical down payment for a fixed rate FHA mortgage is 3% of the total amount borrowed. The advantage of a fixed rate mortgage is a lower interest payment if the mortgage is taken out in a low interest time period. You also have stability, knowing exactly how much your monthly payments will be for the life of the mortgage. Fixed rate mortgages can be 10, 15, 20, and even 30 years.
Adjustable Rate Mortgages
FHA adjustable rate mortgages, or Section 215, have interest rates that increase and decrease depending on what the federal index is set at for the time period. Initially, an ARM (adjustable rate mortgage) is attractive because the interest rates are set lower to attract more people into using it. There are several factors that go in to calculating the ARM, all of which can affect the interest rate that you are being charged. An ARM is typically more appealing to homebuyers who don't intend to stay in the purchased house for more than a few years, as the interest rates tend to increase over that amount of time. An ARM is also convenient if the current interest rate environment is high, as the ARM rates are set lower than a fixed rate mortgage. It may also be more financially appealing to use an ARM when interest rates have peaked, as the subsequent interest charged over the life of the mortgage will most likely reduce monthly payments rather than increase them.
Teacher Next Door
This program is offered directly through HUD (Housing and Urban Development). It allows approved teachers in the United States to purchase housing that has been acquired by HUD at a 50% reduced amount. These homes are typically offered in revitalization areas - areas that are found in low- and moderate-income neighborhoods that may have increased crime rates and many vacant houses, but are targeted as neighborhoods that are good candidates for redevelopment efforts. Under HUD and FHA, teachers not only are able to purchase houses at 50% value, but are only required to make a $100 down payment if the house is financed with an FHA mortgage.
Officer Next Door
This special program is identical to the Teacher Next Door program, only applicable to approved law enforcement officers of the United States. To qualify for the program, law enforcement agents must live in the purchased property for a minimum of three years.
FHA Renovation Mortgages
The FHA Renovation Mortgage, or 203(k), allows homeowners to borrow money in order to, most often, extensively renovate their home. As much as 110% of the costs needed to repair and renovate the home can be financed. There are restrictions as to what types of repairs or renovations can take place, and the minimum amount of the 203(k) is $5000.
Special FHA Program: FHA Bridal Registry Program
Not unlike bridal registry for specialty and department stores, the FHA Bridal Registry program allows a couple to register with a lender. They then open an account that bears interest, and friends or family of the couple can make gift payments into that account. The money gifts do earn interest, and may later be used as down payment towards an FHA mortgage.
FHA Streamline Refinancing
The FHA Streamline Refinancing option has become and increasingly attractive proposition for FHA mortgage holders. It has been in effect since the 1980s for insured mortgages and those who want to refinance for a number of reasons. The "streamline" does not refer to any charges assessed on taking out the new mortgage, but on the reduced paperwork and approval processes needed to receive refinancing on a current FHA mortgage. There are two types of FHA Streamline Refinancing options: Without Appraisal and With Appraisal.
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FHA Streamline Refinancing: Without Appraisal
This type of FHA refinancing is for those who do not want to take cash out of their equity and simply need to refinance for lower interest payment reasons. Without appraisal means that there are no appraisals needed on the property to establish value, and there are no credit evaluations needed to be approved for the mortgage. Using the FHA Streamline Refinancing without approval can save you from having to re-qualify in terms of credit worthiness. However, you will need to reestablish your escrow accounts when you settle the mortgage.
There are also terms under which you must abide when refinancing a mortgage with the streamline approach. These terms are:
· The mortgage that you are refinancing should already be an FHA approved mortgage.
· Cash cannot be withdrawn from equity when using the streamline without appraisal option.
· Refinancing intentions should be simply to lower monthly principal and interest payments.
· The mortgage payments must be current, and a 12-month mortgage payment history will be assessed to make sure no payments have been late.
· There are no income, asset, or employment verifications needed to qualify.
Companies are able to offer streamline refinancing in a variety of ways. Some advertise "no cost" refinancing, which does not mean that the mortgage has no fees associated with it, but that fees are not required "out of pocket" to take out a new mortgage. These fees, typically mortgage origination fees and closing costs, can be financed in with the mortgage, depending on whether or not the mortgage amount does not exceed the original mortgage. Some lenders may require closing costs paid when the mortgage is refinanced, which will result in an absolute lower monthly payment, both in interest and principals.
FHA Streamline Refinancing: With Appraisal
FHA streamline refinancing with appraisal is similar to that without appraisal, only it may be done for homeowners who wish to receive cash from the equity of their home. The other difference between the two is that financing with appraisal requires an appraisal assessment of the property being refinanced, and re-qualification for the mortgage is necessary. Credit, employment, and income requirements will be reassessed upon refinancing with a streamlined with appraisal mortgage. When you take out an FHA Streamline Refinancing mortgage with appraisal, all closing costs for the new mortgage can be refinanced, as well.
There are certain standards that need to be met when refinancing with an FHA Streamline with appraisal. Unless you're going from an adjustable rate mortgage to a fixed rate and your new payment is higher, you may be able to refinance without appraisal. However, if your new payments will be higher than the previous payments, you'll need to refinance with appraisal and undergo all necessary credit, employment, and income verifications. These verifications will also be needed if you refinance to remove a borrower from the previous mortgage, or if you assumed the mortgage without previous credit qualifications within a time period of 6 months.
Q - Why Use FHA Streamline Refinancing?
FHA Streamline Refinancing can be a quick and easy way to take advantage of lower interest rates or to lower your monthly payments. Using the convenience of FHA mortgage qualifications, the amount needed to refinance a mortgage can be quite inexpensive. If you currently have an FHA mortgage and would like lower payments or a cash amount derived from the escrow of your current mortgage, using FHA Streamline Refinancing may be the perfect solution
A: An FHA mortgage is actually more of an insurance than it is a mortgage. The FHA does not lend you money; private lending organizations, such as banks, credit unions, or savings and loans, do. A mortgage secured with FHA approval simply means that your mortgage is insured to the lender in the case of default by the homebuyer.
Q: What are the advantages of an FHA mortgage?
A: The advantages of an FHA mortgage can be many. Typically, only a 3% down payment is required to secure an FHA mortgage. Unlike more traditional mortgages, the money for down payment does not have to be verified as the buyer's money, but can be a gift to the home purchaser from outside sources. In addition, the credit qualifications for an FHA mortgage are often less stringent than with conventional mortgages. Bankruptcy or foreclosure does not necessarily disqualify a borrower from approval, if the processes have been completed within the required time period.
Q: Are FHA mortgage processes complicated?
A: No more so than conventional mortgage processes. Thanks to FHA revamping, the financing procedures were extremely slimmed down within the past 20 years. In some cases, it is easier to qualify for an FHA mortgage than it is for a conventional mortgage.
Q: Who is eligible for an FHA mortgage?
A: Anyone who meets the credit, income, and employment requirements. U.S. Citizenship is not required for an FHA mortgage. However, the property secured with the mortgage must be the purchaser's primary residence. In addition, a social security card is necessary in order to qualify for an FHA mortgage.
Q: What is mortgage insurance, and how does it apply to FHA mortgages?
A: Mortgage insurance is required in order to secure an FHA mortgage. This insurance money is collected by the lender (the bank, credit union, or savings and mortgage) and paid to the FHA. If a buyer defaults on their mortgage, this money is then returned to the lender in the form of insurance against the default. Mortgage insurance costs are typically 1% of the mortgage total. Until 20% of the equity in the home is paid off, private mortgage insurance may be required, as well.
Q: What are the different types of FHA mortgages?
A: There are several different types of FHA mortgages, and these generally reflect those of conventional mortgages. There is a fixed rate mortgage mortgage, which secures an interest rate at the time of purchase and carries it through for the life of the mortgage. There is also an adjustable rate mortgage (ARM). The interest rate on the ARM fluctuates throughout the life of the mortgage, mirroring that of the current national index. There is also a graduated payment mortgage (GPM), which requires a down payment and has negative amortization.
Q: What are the interest rates on FHA mortgages?
A: FHA mortgage interest rates tend to be no lower or higher than the national average for conventional mortgages. The interest rates for FHA mortgages reflect the current market conditions. A buyer may also use points when securing an FHA mortgage. "Points" lower the interest rate, and must be paid either as down payment or financed through the mortgage.
Q: What are my expenses when taking out an FHA mortgage?
A: The expenses a buyer is responsible for when purchasing a house with an FHA mortgage are the following: Down payment (usually no more than 3%), appraisal fee, escrow, mortgage origination fee (typically 1% of base mortgage amount), recording fees, credit report charges, title insurance policy fees, MMI impounds, hazard insurance and reserves, MIP (insurance, which can be financed), and property taxes.
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