Posted by Chris Birk
Bankruptcy and foreclosure have become increasingly common in the rough economic stretch of the past few years.
These are tough financial decisions that can significantly affect a consumer’s credit score and overall fiscal health. But veterans and active duty military members, it’s important to know that a bankruptcy or foreclosure doesn’t mean you have to forget purchasing a home with your VA entitlement.
A bankruptcy or foreclosure doesn’t automatically disqualify you from getting a VA loan. For the first two years following the event, it will be all but impossible. But if you use that time to rebuild your devastated credit, a VA loan can still be in your future.
A bankruptcy or foreclosure doesn’t automatically disqualify you from getting a VA loan. For the first two years following the event, it will be all but impossible. These events won’t just disappear from your credit report. And lenders will consider them as negative compensating factors that in combination with other problems can kill a loan application.
But if you commit to rebuilding your credit and making on-time payments, VA loan can still be in your future.
Bankruptcy
There are two major types of personal bankruptcy protection — Chapter 7 and Chapter 13 —and both will crush your credit. Consumers can expect their credit scores to drop from 130 to 240 points.
That alone will make qualifying for a VA loan incredibly difficult, but lenders also require borrowers to be a “satisfactory credit risk.” VA-approved lenders want to see that prospective borrowers can return to a solid financial footing over a two-year period.
The VA has some exceptions that allow military members to participate in the program before that two-year mark. But, remember that VA-approved lenders, and not the VA, ultimately issue the loan. They have more stringent standards that rise above the VA’s requirements.
And that means there’s almost no way for a borrower to secure financing until at least the two-year mark after a bankruptcy discharge.
It’s also important to remember that a prior bankruptcy never just disappears. If you have any slips after a bankruptcy is on your record, even if they’re only a couple late payments on small accounts, a lender may decide you’re too much of a risk and deny your loan application. A lender will also look to make sure you haven’t had a late payment in at least the previous 12 months. In the wake of a bankruptcy filing and discharge, a single late payment in that span will all but nullify your loan application.
Foreclosure
Foreclosure can take several forms: foreclosure, short sale or a deed-in-lieu of foreclosure.
Foreclosure is when the bank takes back your house through formal proceedings because you can’t make the payments. A short sale is when the lender allows an underwater homeowner to sell the home for less than what is owed, in order to recover at least some of the cost.
A deed-in-lieu allows a homeowner to return the house to the lender without formal foreclosure proceedings. None are particularly beneficial outcomes for borrowers, and all can prove more problematic for military buyers.
In terms of a credit crunch, none is quite as damaging as a bankruptcy, which can shave anywhere from 85 to 160 from your score. Although your credit score won’t be quite as devastated, you will still be unlikely to qualify for another loan for the first two years and will need to work hard to rebuild your credit.
Possibly compounding the issue, countless service members have been told they could never again qualify for a VA loan if they had a previous VA loan foreclosed upon. That’s simply false. A unique concept called second-tier entitlement can help veterans in this situation once they’re beyond that two-year window.
Each of these financial events can be devastating, but they don’t determine your future. Mistakes and tough times in the past can put homeownership out of reach for a time. But if you’re committed to rebuilding your financial profile and meeting all obligations moving forward, the VA home loan program may still be a viable vehicle for a home purchase.
My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.
The role of technology is rapidly changing how the real-estate market functions in this country today. Gerharter Realtors is embracing these new mediums of communication to better serve our customers. We have created our e-family to better place important information in your hands to help you with your housing needs. As a part of Gerharter Enterprises we have access to a broader range of additional services and resources to better assist you. Visit me at my Web Site, Blog, Facebook, Twitter, You Tube or Pinterest. Please check out our helpful resources on Sellers Tips, Buyers Tips, Foreclosure Tips, and Mortgage Tips. For a personal consultation please visit our Office.
It seems that the dream of past generations was to pay off a mortgage. The dream of today’s young families is to get one. I would love to hear from you, about your Real Estate Dreams and questions.
Email me at scott@gerharterrealtors.com.
Saturday, March 30, 2013
Obtaining an FHA Home Loan with Bad Credit or Bankruptcy
By Daniel Duffield
Times have been tough for many homeowners whose credit scores have greatly suffered as a result of the housing market collapse. For borrowers with bad credit, qualifying for a home loan can seem like a daunting task, especially following a credit-damaging event such as bankruptcy, foreclosure, or short sale. However, it’s never too late to turn things around; though challenging, borrowers who wish to obtain an FHA loan after bankruptcy can qualify, with some patience and financial responsibility.
FHA Loan After a Bankruptcy
Many people wonder if they can get a FHA home loan after a bankruptcy during these recent, troubled years. The short answer: it depends.
Chapter 7 Bankruptcy Guidelines
For borrowers that have filed Chapter 7 Bankruptcy, they must be discharged a minimum of two years. Anyone with a discharge date less than two years old will be faced with some strenuous documentation. These exceptional situations may still be considered, so be prepared to state your case. Borrowers need to provide proof of beginning new credit history with satisfactory payments. Alternatively, if the borrower has decided not to borrow again after the bankruptcy, they must outline the causes for the bankruptcy. Borrowers will have significantly better chances of getting approved for an FHA loan with bankruptcy, if they can successfully prove to a lender that they can successfully manage typical home expenses and that they have effectively “learned their lesson.” These individuals should look for the lowest mortgage rates so that they have a better chance of keeping up with the payments.
If you have filed for Chapter 7 Bankruptcy, you should:
Wait a minimum of 2 years after being discharged
Collect and provide proof of new, spotless credit history to your lender
If you do not plan to borrow again, outline the causes for the initial bankruptcy
Chapter 13 Bankruptcy Guidelines
For individuals currently participating in a Chapter 13 repayment plan, the first step make twelve months of on-time payments into the plan. This will signal to a lender that the borrower has become more responsible in managing finances. Secondly, borrowers will need to get approval from the bankruptcy court to enter into the mortgage agreement. An FHA loan does not have any penalties for prepayment and the rates are excellent. People who filed a Chapter 13 bankruptcy within the last few years should contact a FHA lender to discuss the possibility to get approved for a home loan.
If you have filed for Chapter 13 Bankruptcy, you should:
Make 12 months of payments on-time
Get approval from the bankruptcy court
For people involved with Consumer Credit counseling, the guidelines are akin to the Chapter 13 guidelines. Borrowers need to prove they have made on-time payments for at least the past 12 months and get their counseling agency’s recommendation to proceed with a FHA loan after bankruptcy.
If you find yourself in any type of bankruptcy or credit counseling, it is vitally important that you make all payments on time. In addition to improving your chances of acquiring a loan, this will prevent any additional negative items appearing on your credit report.
FHA Loan After a Foreclosure
As with bankruptcy, foreclosure does not necessarily ruin your chances of acquiring an FHA loan. While foreclosure does severely damage a borrower’s credit rating, borrowers who had no control over the foreclosing of their properties can still qualify and acquire an FHA loan with patience and prudent financial management.
Extenuating Circumstances
To qualify for an FHA loan, post-foreclosure borrowers must be able to provide excusing reasons for their foreclosure. Specifically, the cause of the foreclosure must be through extenuating circumstances which the borrower could have no control over. For instance, serious illness, the death of a spouse, or a job transfer all occur beyond the control of the borrower and thus would circumstantially excuse a foreclosure, allowing the borrower to reapply once the foreclosure is sufficiently dated.
Waiting Period
In terms of the mandatory waiting period, borrowers who have endured a foreclosure must wait a minimum of three years from the completion date of their foreclosure, i.e. the date in which the deed transfers to the next owner, before they are able to qualify for an FHA loan. This figure is deceptive, however, since the last thing a borrower should do after a foreclosure is to passively wait. If you intend to secure an FHA loan as soon as possible, the three years following a foreclosure will be the most significant factor for a lender in determining whether or not you will qualify.
Re-establishing Credit
After a foreclosure or similar credit-damaging event, re-establishing credit is the most important step for borrowers who would pursue another loan. When applying for an FHA loan after a foreclosure, lenders will scrutinize your credit history, and many require at least four new lines of credit, all of which must be more than two years old. Therefore, treating the waiting period literally will end up costing you much more time than if you immediately begin new credit lines following your foreclosure.
Proving Reliability
Furthermore, qualifying for an FHA loan post-foreclosure requires convincing the lender that you are the definition of financial responsibility and that you deserve another chance. In doing so, it is critically important to make payments on time. Late payments will require letters of explanation to be considered by the FHA underwriter overseeing your loan, so save yourself the trouble and avoid making late payments.
FHA Loan After a Short Sale
Purchasing a home after a short sale may seem like quite a challenge; however, if your short sale was the result of extenuating circumstances, you should have no problem qualifying for an FHA loan.
Waiting Period Removed for Some
In fact, the Federal Housing Administration recently made changes to loan policy, making it easier than ever for borrowers to acquire an FHA loan. Although the waiting period for post-short sale borrowers has traditionally been three years, new regulations have eliminated the waiting period for borrowers who were current on their mortgage payments during the time of the short sale and who made all mortgage and installment debt payments on-time within the past twelve months.
Qualifying after Default
Even a borrower in default at the time of the short sale may qualify for an FHA loan sooner than three years with extenuating circumstances, provided his or her credit remained at a reasonable score until the default.
However, keep in mind that these changes only reflect the official FHA loan guidelines; when seeking a loan, qualification rests on the discretion of the lender, and borrowers may find many lenders that will refuse to make offers to anyone with short sales less than three years old. Needless to say, any borrower who engaged in a short sale to take advantage of weakening market conditions and intends to buy a similar property in the same area will not qualify for an FHA loan.
Where to Find an approved FHA Lender Near You
If you are considering taking out an FHA loan, it is important to shop around to find the absolute best rates for your loan. Due to the large amounts of money in an FHA loan, small adjustments in interest rates can make a significant difference in the total cost of your loan. To find the best possible rates for your future FHA loan, simply fill out our Lender411’s FHA Mortgage Request a Quote.
My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.
The role of technology is rapidly changing how the real-estate market functions in this country today. Gerharter Realtors is embracing these new mediums of communication to better serve our customers. We have created our e-family to better place important information in your hands to help you with your housing needs. As a part of Gerharter Enterprises we have access to a broader range of additional services and resources to better assist you. Visit me at my Web Site, Blog, Facebook, Twitter, You Tube or Pinterest. Please check out our helpful resources on Sellers Tips, Buyers Tips, Foreclosure Tips, and Mortgage Tips. For a personal consultation please visit our Office.
It seems that the dream of past generations was to pay off a mortgage. The dream of today’s young families is to get one. I would love to hear from you, about your Real Estate Dreams and questions.
Email me at scott@gerharterrealtors.com.
Times have been tough for many homeowners whose credit scores have greatly suffered as a result of the housing market collapse. For borrowers with bad credit, qualifying for a home loan can seem like a daunting task, especially following a credit-damaging event such as bankruptcy, foreclosure, or short sale. However, it’s never too late to turn things around; though challenging, borrowers who wish to obtain an FHA loan after bankruptcy can qualify, with some patience and financial responsibility.
FHA Loan After a Bankruptcy
Many people wonder if they can get a FHA home loan after a bankruptcy during these recent, troubled years. The short answer: it depends.
Chapter 7 Bankruptcy Guidelines
For borrowers that have filed Chapter 7 Bankruptcy, they must be discharged a minimum of two years. Anyone with a discharge date less than two years old will be faced with some strenuous documentation. These exceptional situations may still be considered, so be prepared to state your case. Borrowers need to provide proof of beginning new credit history with satisfactory payments. Alternatively, if the borrower has decided not to borrow again after the bankruptcy, they must outline the causes for the bankruptcy. Borrowers will have significantly better chances of getting approved for an FHA loan with bankruptcy, if they can successfully prove to a lender that they can successfully manage typical home expenses and that they have effectively “learned their lesson.” These individuals should look for the lowest mortgage rates so that they have a better chance of keeping up with the payments.
If you have filed for Chapter 7 Bankruptcy, you should:
Wait a minimum of 2 years after being discharged
Collect and provide proof of new, spotless credit history to your lender
If you do not plan to borrow again, outline the causes for the initial bankruptcy
Chapter 13 Bankruptcy Guidelines
For individuals currently participating in a Chapter 13 repayment plan, the first step make twelve months of on-time payments into the plan. This will signal to a lender that the borrower has become more responsible in managing finances. Secondly, borrowers will need to get approval from the bankruptcy court to enter into the mortgage agreement. An FHA loan does not have any penalties for prepayment and the rates are excellent. People who filed a Chapter 13 bankruptcy within the last few years should contact a FHA lender to discuss the possibility to get approved for a home loan.
If you have filed for Chapter 13 Bankruptcy, you should:
Make 12 months of payments on-time
Get approval from the bankruptcy court
For people involved with Consumer Credit counseling, the guidelines are akin to the Chapter 13 guidelines. Borrowers need to prove they have made on-time payments for at least the past 12 months and get their counseling agency’s recommendation to proceed with a FHA loan after bankruptcy.
If you find yourself in any type of bankruptcy or credit counseling, it is vitally important that you make all payments on time. In addition to improving your chances of acquiring a loan, this will prevent any additional negative items appearing on your credit report.
FHA Loan After a Foreclosure
As with bankruptcy, foreclosure does not necessarily ruin your chances of acquiring an FHA loan. While foreclosure does severely damage a borrower’s credit rating, borrowers who had no control over the foreclosing of their properties can still qualify and acquire an FHA loan with patience and prudent financial management.
Extenuating Circumstances
To qualify for an FHA loan, post-foreclosure borrowers must be able to provide excusing reasons for their foreclosure. Specifically, the cause of the foreclosure must be through extenuating circumstances which the borrower could have no control over. For instance, serious illness, the death of a spouse, or a job transfer all occur beyond the control of the borrower and thus would circumstantially excuse a foreclosure, allowing the borrower to reapply once the foreclosure is sufficiently dated.
Waiting Period
In terms of the mandatory waiting period, borrowers who have endured a foreclosure must wait a minimum of three years from the completion date of their foreclosure, i.e. the date in which the deed transfers to the next owner, before they are able to qualify for an FHA loan. This figure is deceptive, however, since the last thing a borrower should do after a foreclosure is to passively wait. If you intend to secure an FHA loan as soon as possible, the three years following a foreclosure will be the most significant factor for a lender in determining whether or not you will qualify.
Re-establishing Credit
After a foreclosure or similar credit-damaging event, re-establishing credit is the most important step for borrowers who would pursue another loan. When applying for an FHA loan after a foreclosure, lenders will scrutinize your credit history, and many require at least four new lines of credit, all of which must be more than two years old. Therefore, treating the waiting period literally will end up costing you much more time than if you immediately begin new credit lines following your foreclosure.
Proving Reliability
Furthermore, qualifying for an FHA loan post-foreclosure requires convincing the lender that you are the definition of financial responsibility and that you deserve another chance. In doing so, it is critically important to make payments on time. Late payments will require letters of explanation to be considered by the FHA underwriter overseeing your loan, so save yourself the trouble and avoid making late payments.
FHA Loan After a Short Sale
Purchasing a home after a short sale may seem like quite a challenge; however, if your short sale was the result of extenuating circumstances, you should have no problem qualifying for an FHA loan.
Waiting Period Removed for Some
In fact, the Federal Housing Administration recently made changes to loan policy, making it easier than ever for borrowers to acquire an FHA loan. Although the waiting period for post-short sale borrowers has traditionally been three years, new regulations have eliminated the waiting period for borrowers who were current on their mortgage payments during the time of the short sale and who made all mortgage and installment debt payments on-time within the past twelve months.
Qualifying after Default
Even a borrower in default at the time of the short sale may qualify for an FHA loan sooner than three years with extenuating circumstances, provided his or her credit remained at a reasonable score until the default.
However, keep in mind that these changes only reflect the official FHA loan guidelines; when seeking a loan, qualification rests on the discretion of the lender, and borrowers may find many lenders that will refuse to make offers to anyone with short sales less than three years old. Needless to say, any borrower who engaged in a short sale to take advantage of weakening market conditions and intends to buy a similar property in the same area will not qualify for an FHA loan.
Where to Find an approved FHA Lender Near You
If you are considering taking out an FHA loan, it is important to shop around to find the absolute best rates for your loan. Due to the large amounts of money in an FHA loan, small adjustments in interest rates can make a significant difference in the total cost of your loan. To find the best possible rates for your future FHA loan, simply fill out our Lender411’s FHA Mortgage Request a Quote.
My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.
The role of technology is rapidly changing how the real-estate market functions in this country today. Gerharter Realtors is embracing these new mediums of communication to better serve our customers. We have created our e-family to better place important information in your hands to help you with your housing needs. As a part of Gerharter Enterprises we have access to a broader range of additional services and resources to better assist you. Visit me at my Web Site, Blog, Facebook, Twitter, You Tube or Pinterest. Please check out our helpful resources on Sellers Tips, Buyers Tips, Foreclosure Tips, and Mortgage Tips. For a personal consultation please visit our Office.
It seems that the dream of past generations was to pay off a mortgage. The dream of today’s young families is to get one. I would love to hear from you, about your Real Estate Dreams and questions.
Email me at scott@gerharterrealtors.com.
What is an FHA loan?
By Daniel Duffield
An FHA loan is a loan that is insured by the Federal Housing Administration. Since the FHA guarantees to pay the balance in the event of a loan defaulting, rather than the lender having to write it off, FHA loans are open to people with poor credit history or to those who are unable to make large down payments. A FHA Loan can help you acquire a home with as little as 3.5%, instead of the high percentages required to obtain a typical conventional loan. This allows a great advantage for first time home buyers or anyone who wants smaller down payments to buy a home.
What is the FHA?
The Federal Housing Administration was created in 1934 to combat the effects of the Great Depression by providing citizens with access to affordable loans, thus providing many Americans with the means to purchase a home. Since its initiation, the FHA has helped to finance over 34 million homes, and FHA loans remain popular today.
What are the qualifications for an FHA loan?
If you are considering an FHA loan, you must be able to meet FHA requirements. Firstly, to even consider obtaining an FHA loan, you must be able to pay the minimum 3.5% down payment on the loan. Next, you must pay the 2.25% closing cost, however, this amount may be added to the loan itself. Additionally, to secure an FHA loan you must be in decent credit standing; if you have filed for bankruptcy or undergone foreclosure, you can still qualify as long as you have raised your credit rating since then. Moreover, you must be able to show a record of continuous income to prove to a lender your reliability. Finally, you must pay the title costs, which are fees related to the transfer of a property title.
Be able to make a 3.5% down payment
Pay 2.25% closing cost (can be added to the loan)
Be able to show proof of 3 years of continuous income
Have proof that you have paid all bills continuously for the past 3 years
If you have filed for bankruptcy, it must be at least 2 years old and you must have since had a good credit standing (Chapter 7 - 2 years, Chapter 13- 1 year)
If you’ve had a foreclosure, it must be at least 3 years old and you must have since had a good credit standing
Pay all title related costs (title search, title insurance, etc.)
To learn more about FHA requirements, please visit Lender411’s comprehensive FHA Loan requirements page.
Who should get an FHA mortgage loan?
If you are unfamiliar with FHA loans or inexperienced with loans in general, an FHA loan might be the loan for you. Typically, loans secured by the Federal Housing Administration best fit first-time home buyers or borrowers with low to moderate income. This dates back to the creation of the FHA as a means of stimulating the economy during the Great Depression by making it easier for people with lower credit scores or less income to secure a loan and purchase a home. As such, FHA mortgage loans tend to be best for those who are otherwise unable to acquire a conventional mortgage loan, though this is not always the case. Here are a few questions that you might ask yourself to determine whether or not an FHA loan is your optimal choice:
Have I had a steady income for the last two years?
When applying for an FHA loan, it is important to provide your lender with proof of two years of steady income. Although not mandatory, your chances of qualifying for an FHA mortgage loan without proof of income are significantly lower.
Do I have a low credit score?
FHA loans have low credit requirements, which enable many people with bad credit to secure loans. Even after filing for bankruptcy or undergoing a foreclosure, you may still have the necessary credit to qualify for an FHA loan, provided you have improved your credit standing since then.
Will I be able to put forward a large down payment?
If you are unable to afford putting down a large sum for a down payment, you should consider taking out an FHA mortgage loan. FHA loans down payments can be as low as 3.5%, considerably lower than conventional mortgages.
Will an FHA loan cover the cost of my potential home?
The Federal Housing Administration has separate loan limits for each county. If your potential residence costs more than the maximum limit for an FHA loan, you should consider alternatives.
Do I qualify?
Last but certainly not least, in order to even consider getting an FHA loan, you must first know whether or not you qualify. Make sure to get pre-approved before you start looking for your home.
What are the advantages to an FHA loan?
o For the right borrower, FHA home loans have many advantages. For instance, FHA loans are more affordable than conventional loans since down payments can be as low as 3.5%. In addition, when acquiring an FHA loan, lenders tend to be more lenient in considering borrowers’ credit rating, since the Federal Housing Administration insures that the loan will be paid in full. Consequently, FHA loans can be acquired even by borrowers who have filed for bankruptcy or undergone foreclosure. Furthermore, FHA loans do not include prepayment penalties.
Low down payment requirement of only 3.5%, with credit scores as low as 580.
More lenient on credit ranking as opposed to a conventional loan
Borrower can add closing costs to the loan amount
Offer very similar rates to conventional mortgages
Government has recently increased FHA Loan amounts to qualify more types of property
No prepayment penalties
Can still be acquired after bankruptcy or foreclosure
What are the disadvantages of an FHA loan?
The major disadvantage of FHA loan is that they include mandatory mortgage insurance, thus adding to the cost of the loan. Mortgage insurance payments are divided into an upfront mortgage premium of 1.75% and an annual premium charged in small monthly installments. Another disadvantage of FHA loans is the fact that many properties are ineligible (although this number is decreasing). Finally, FHA loans are less flexible and offer far less options than conventional loans.
Mortgage insurance premiums, upfront and annual
Not all properties qualify
Limited options compared to other loans
What are the FHA limits on loan amounts?
The limits on the maximum amount a borrower can receive from the FHA are relative to the housing costs in the area where the borrower’s intended property is located. In other words, in lower value home areas, limits for FHA loans cap at $271,000, though limits can be as high as $625,500 in areas with high valued homes. Regardless of your credit score and income, a lender cannot grant you a loan that exceeds FHA limits for that particular area.
What are the basic types of FHA loans?
FHA loans come in several different types, the most basic being adjustable rate and fixed rate FHA loans. In addition to these, there are also graduated payment mortgages, which are loans for homebuyers that expect their income to significantly rise within the next 5 to 10 years. Furthermore, Growing Equity Mortgages are special FHA loans that allow low income borrowers who expect an increase in their income to buy a house with incrementally increasing payments. As payments increase, the additional expenses go toward the mortgage’s principal, thereby reducing the term of the mortgage. Finally, Energy Efficient Mortgages (EEM) are designed to aid homeowners or homebuyers drastically decrease their monthly utility bills, incorporating these efficiency improvements into their FHA loan.
FHA Loan: Adjustable Rate
FHA Loan: Fixed Rate
Graduated Payment Mortgages
Growing Equity Mortgages
Energy Efficient Mortgage
203(k) Mortgage Loan
What Refinance Options are Available with FHA Loans?
For homeowners considering their refinance options, the FHA offers a standard refinancing program for homeowners with conventional mortgages as well as pre-existing FHA mortgages. FHA refinancing carries the same advantages of FHA loans, such as relaxed credit requirements and lower than average mortgage rates. In addition, homeowners with an existing FHA mortgage have the option of performing a streamline FHA refinance, allowing them to skip verification for credit score, income, and employment history, making the process much quicker and more convenient. In addition, FHA streamlined refinancing does not require a borrower’s property to be reappraised; instead, the FHA uses the original selling price of the home, significantly benefiting homeowners with underwater houses.
What types of property are insured by the FHA?
The Federal Housing Administration insures four types of properties: single family homes, condominiums, manufactured homes, and duplex units. For single family homes, the FHA will finance up to 97% of the home purchase price. Condominiums are also insured by the FHA; however, the building must have four or more units for personal residence, and condominiums that were previously used for renting may be ineligible. Manufactured homes are eligible for FHA Mortgage loans as long as the floor area of the property is 400 square feet or larger. Mortgages for manufactured homes must also cover both the home and the location where the home is situated. Duplexes, triplexes, and fourplexes all qualify for FHA loans as long as the property is solely owned by one person or family, though other families may live in them. Furthermore, all units of the property must be inhabited.
Single family homes
Condominiums
Manufactured homes
Duplex units
Where can I get an FHA loan?
Comparing multiple FHA mortgage lenders is always a wise idea when searching for the lowest and best mortgage rates for a FHA home loan.FHA mortgages are not actually originated by the FHA. The FHA merely provides insurance to cover private loans. As a result, the FHA loan process is not standardized. Terms and qualification requirements vary from lender to lender. Compare lenders in order to find the best terms to meet your needs. There are three elements of each offer you’ll want to check on when comparing:
1. Interest rate.
Find a lender that offers a solid low interest rate. The lower the rate is, the better, because this will mean less money out of your pocket in the long run. But don’t stop after comparing interest rates. A low interest rate may be a sign of high costs elsewhere in the deal.
2. Closing costs.
Many borrowers find themselves blindsided by high closing costs and hidden fees when securing a loan. Check up on these costs when comparing lenders. Often, a loan with a low interest rate will actually cost you more money due to high closing costs. Be careful.
3. Fixed or adjustable.
Adjustable rate mortgages always have lower initial interest rates than fixed rate mortgages, which could save you money, but be cautious. The interest rate for an adjustable rate mortgage may increase over time, costing you more. A fixed rate mortgage will never increase or decrease, but it will likely be higher overall than a similar adjustable rate mortgage. Make sure you know which is which, and make sure you know which variety you are signing up for.
Look at each of these elements when comparing different FHA lenders. It can be helpful to submit a request for quotes to a third party company that specializes in gathering mortgage rates. Many such companies will provide you with personalized quotes from a variety of lenders, and they’ll do it for free. This can save you time, stress, and effort, and you won’t have to deal with repetitive paperwork.
Regardless of how you find FHA lenders, compare these three elements and make sure you know what you’re looking for, otherwise you may find that your comparison is worthless.
My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.
The role of technology is rapidly changing how the real-estate market functions in this country today. Gerharter Realtors is embracing these new mediums of communication to better serve our customers. We have created our e-family to better place important information in your hands to help you with your housing needs. As a part of Gerharter Enterprises we have access to a broader range of additional services and resources to better assist you. Visit me at my Web Site, Blog, Facebook, Twitter, You Tube or Pinterest. Please check out our helpful resources on Sellers Tips, Buyers Tips, Foreclosure Tips, and Mortgage Tips. For a personal consultation please visit our Office.
It seems that the dream of past generations was to pay off a mortgage. The dream of today’s young families is to get one. I would love to hear from you, about your Real Estate Dreams and questions.
Email me at scott@gerharterrealtors.com.
An FHA loan is a loan that is insured by the Federal Housing Administration. Since the FHA guarantees to pay the balance in the event of a loan defaulting, rather than the lender having to write it off, FHA loans are open to people with poor credit history or to those who are unable to make large down payments. A FHA Loan can help you acquire a home with as little as 3.5%, instead of the high percentages required to obtain a typical conventional loan. This allows a great advantage for first time home buyers or anyone who wants smaller down payments to buy a home.
What is the FHA?
The Federal Housing Administration was created in 1934 to combat the effects of the Great Depression by providing citizens with access to affordable loans, thus providing many Americans with the means to purchase a home. Since its initiation, the FHA has helped to finance over 34 million homes, and FHA loans remain popular today.
What are the qualifications for an FHA loan?
If you are considering an FHA loan, you must be able to meet FHA requirements. Firstly, to even consider obtaining an FHA loan, you must be able to pay the minimum 3.5% down payment on the loan. Next, you must pay the 2.25% closing cost, however, this amount may be added to the loan itself. Additionally, to secure an FHA loan you must be in decent credit standing; if you have filed for bankruptcy or undergone foreclosure, you can still qualify as long as you have raised your credit rating since then. Moreover, you must be able to show a record of continuous income to prove to a lender your reliability. Finally, you must pay the title costs, which are fees related to the transfer of a property title.
Be able to make a 3.5% down payment
Pay 2.25% closing cost (can be added to the loan)
Be able to show proof of 3 years of continuous income
Have proof that you have paid all bills continuously for the past 3 years
If you have filed for bankruptcy, it must be at least 2 years old and you must have since had a good credit standing (Chapter 7 - 2 years, Chapter 13- 1 year)
If you’ve had a foreclosure, it must be at least 3 years old and you must have since had a good credit standing
Pay all title related costs (title search, title insurance, etc.)
To learn more about FHA requirements, please visit Lender411’s comprehensive FHA Loan requirements page.
Who should get an FHA mortgage loan?
If you are unfamiliar with FHA loans or inexperienced with loans in general, an FHA loan might be the loan for you. Typically, loans secured by the Federal Housing Administration best fit first-time home buyers or borrowers with low to moderate income. This dates back to the creation of the FHA as a means of stimulating the economy during the Great Depression by making it easier for people with lower credit scores or less income to secure a loan and purchase a home. As such, FHA mortgage loans tend to be best for those who are otherwise unable to acquire a conventional mortgage loan, though this is not always the case. Here are a few questions that you might ask yourself to determine whether or not an FHA loan is your optimal choice:
Have I had a steady income for the last two years?
When applying for an FHA loan, it is important to provide your lender with proof of two years of steady income. Although not mandatory, your chances of qualifying for an FHA mortgage loan without proof of income are significantly lower.
Do I have a low credit score?
FHA loans have low credit requirements, which enable many people with bad credit to secure loans. Even after filing for bankruptcy or undergoing a foreclosure, you may still have the necessary credit to qualify for an FHA loan, provided you have improved your credit standing since then.
Will I be able to put forward a large down payment?
If you are unable to afford putting down a large sum for a down payment, you should consider taking out an FHA mortgage loan. FHA loans down payments can be as low as 3.5%, considerably lower than conventional mortgages.
Will an FHA loan cover the cost of my potential home?
The Federal Housing Administration has separate loan limits for each county. If your potential residence costs more than the maximum limit for an FHA loan, you should consider alternatives.
Do I qualify?
Last but certainly not least, in order to even consider getting an FHA loan, you must first know whether or not you qualify. Make sure to get pre-approved before you start looking for your home.
What are the advantages to an FHA loan?
o For the right borrower, FHA home loans have many advantages. For instance, FHA loans are more affordable than conventional loans since down payments can be as low as 3.5%. In addition, when acquiring an FHA loan, lenders tend to be more lenient in considering borrowers’ credit rating, since the Federal Housing Administration insures that the loan will be paid in full. Consequently, FHA loans can be acquired even by borrowers who have filed for bankruptcy or undergone foreclosure. Furthermore, FHA loans do not include prepayment penalties.
Low down payment requirement of only 3.5%, with credit scores as low as 580.
More lenient on credit ranking as opposed to a conventional loan
Borrower can add closing costs to the loan amount
Offer very similar rates to conventional mortgages
Government has recently increased FHA Loan amounts to qualify more types of property
No prepayment penalties
Can still be acquired after bankruptcy or foreclosure
What are the disadvantages of an FHA loan?
The major disadvantage of FHA loan is that they include mandatory mortgage insurance, thus adding to the cost of the loan. Mortgage insurance payments are divided into an upfront mortgage premium of 1.75% and an annual premium charged in small monthly installments. Another disadvantage of FHA loans is the fact that many properties are ineligible (although this number is decreasing). Finally, FHA loans are less flexible and offer far less options than conventional loans.
Mortgage insurance premiums, upfront and annual
Not all properties qualify
Limited options compared to other loans
What are the FHA limits on loan amounts?
The limits on the maximum amount a borrower can receive from the FHA are relative to the housing costs in the area where the borrower’s intended property is located. In other words, in lower value home areas, limits for FHA loans cap at $271,000, though limits can be as high as $625,500 in areas with high valued homes. Regardless of your credit score and income, a lender cannot grant you a loan that exceeds FHA limits for that particular area.
What are the basic types of FHA loans?
FHA loans come in several different types, the most basic being adjustable rate and fixed rate FHA loans. In addition to these, there are also graduated payment mortgages, which are loans for homebuyers that expect their income to significantly rise within the next 5 to 10 years. Furthermore, Growing Equity Mortgages are special FHA loans that allow low income borrowers who expect an increase in their income to buy a house with incrementally increasing payments. As payments increase, the additional expenses go toward the mortgage’s principal, thereby reducing the term of the mortgage. Finally, Energy Efficient Mortgages (EEM) are designed to aid homeowners or homebuyers drastically decrease their monthly utility bills, incorporating these efficiency improvements into their FHA loan.
FHA Loan: Adjustable Rate
FHA Loan: Fixed Rate
Graduated Payment Mortgages
Growing Equity Mortgages
Energy Efficient Mortgage
203(k) Mortgage Loan
What Refinance Options are Available with FHA Loans?
For homeowners considering their refinance options, the FHA offers a standard refinancing program for homeowners with conventional mortgages as well as pre-existing FHA mortgages. FHA refinancing carries the same advantages of FHA loans, such as relaxed credit requirements and lower than average mortgage rates. In addition, homeowners with an existing FHA mortgage have the option of performing a streamline FHA refinance, allowing them to skip verification for credit score, income, and employment history, making the process much quicker and more convenient. In addition, FHA streamlined refinancing does not require a borrower’s property to be reappraised; instead, the FHA uses the original selling price of the home, significantly benefiting homeowners with underwater houses.
What types of property are insured by the FHA?
The Federal Housing Administration insures four types of properties: single family homes, condominiums, manufactured homes, and duplex units. For single family homes, the FHA will finance up to 97% of the home purchase price. Condominiums are also insured by the FHA; however, the building must have four or more units for personal residence, and condominiums that were previously used for renting may be ineligible. Manufactured homes are eligible for FHA Mortgage loans as long as the floor area of the property is 400 square feet or larger. Mortgages for manufactured homes must also cover both the home and the location where the home is situated. Duplexes, triplexes, and fourplexes all qualify for FHA loans as long as the property is solely owned by one person or family, though other families may live in them. Furthermore, all units of the property must be inhabited.
Single family homes
Condominiums
Manufactured homes
Duplex units
Where can I get an FHA loan?
Comparing multiple FHA mortgage lenders is always a wise idea when searching for the lowest and best mortgage rates for a FHA home loan.FHA mortgages are not actually originated by the FHA. The FHA merely provides insurance to cover private loans. As a result, the FHA loan process is not standardized. Terms and qualification requirements vary from lender to lender. Compare lenders in order to find the best terms to meet your needs. There are three elements of each offer you’ll want to check on when comparing:
1. Interest rate.
Find a lender that offers a solid low interest rate. The lower the rate is, the better, because this will mean less money out of your pocket in the long run. But don’t stop after comparing interest rates. A low interest rate may be a sign of high costs elsewhere in the deal.
2. Closing costs.
Many borrowers find themselves blindsided by high closing costs and hidden fees when securing a loan. Check up on these costs when comparing lenders. Often, a loan with a low interest rate will actually cost you more money due to high closing costs. Be careful.
3. Fixed or adjustable.
Adjustable rate mortgages always have lower initial interest rates than fixed rate mortgages, which could save you money, but be cautious. The interest rate for an adjustable rate mortgage may increase over time, costing you more. A fixed rate mortgage will never increase or decrease, but it will likely be higher overall than a similar adjustable rate mortgage. Make sure you know which is which, and make sure you know which variety you are signing up for.
Look at each of these elements when comparing different FHA lenders. It can be helpful to submit a request for quotes to a third party company that specializes in gathering mortgage rates. Many such companies will provide you with personalized quotes from a variety of lenders, and they’ll do it for free. This can save you time, stress, and effort, and you won’t have to deal with repetitive paperwork.
Regardless of how you find FHA lenders, compare these three elements and make sure you know what you’re looking for, otherwise you may find that your comparison is worthless.
My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.
The role of technology is rapidly changing how the real-estate market functions in this country today. Gerharter Realtors is embracing these new mediums of communication to better serve our customers. We have created our e-family to better place important information in your hands to help you with your housing needs. As a part of Gerharter Enterprises we have access to a broader range of additional services and resources to better assist you. Visit me at my Web Site, Blog, Facebook, Twitter, You Tube or Pinterest. Please check out our helpful resources on Sellers Tips, Buyers Tips, Foreclosure Tips, and Mortgage Tips. For a personal consultation please visit our Office.
It seems that the dream of past generations was to pay off a mortgage. The dream of today’s young families is to get one. I would love to hear from you, about your Real Estate Dreams and questions.
Email me at scott@gerharterrealtors.com.
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