FHA Home Loan Products
The Federal Government supports Mortgage lending and standards for homeowners not eligible for Confirming and Conventional loans.
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FHA Home Loan Products
- FHA Loan – Refinance out of a skyrocketing mortgage payment with the fixed-rate security of a government-insured FHA loan. Find out if you could refinance without an appraisal with our easy FHA Streamline tool.
- FHA streamline refinance = Borrowers with a current FHA loan may be eligible for the FHA streamline refinance program, which allows you to take out a new FHA loan with better terms and skip income documentation and a home appraisal
- FHA cash-out refinance = Borrowers with scores as low as 500 may be able to borrow up to 80% of their home’s value through a cash-out refinance
- FHA rate-and-term refinance = You can refinance an FHA or non-FHA loan up to 97.75% of the value of your home with small credit scores and add closing costs to the loan.
- FHA 203(k) loan = Borrowers can purchase or refinance a home and roll the renovation costs into one loan with the FHA 203(k) rehab loan program
- Energy-efficient mortgage (EEM) = Homeowners can add the cost of energy-saving upgrades to the balance of a purchase or refinance loan with an FHA energy-efficient mortgage
- Home equity conversion mortgage (HECM) = More commonly known as a reverse mortgage, the HECM loan gives borrowers aged 62 or older multiple options to access their equity and avoid a monthly payment
- FHA GPM/GEM loan = This program gives qualified borrowers the option to choose a loan with lower initial payments that increase as their income rises (called a graduated-payment mortgage or GPM), or the choice to increase principal payments and pay off the loan faster (called a growing equity mortgage or GEM)
The Basics about FHA Mortgage Products
FHA loans basically work like any other home loan program.
Based on credit history, income, and employment background, you must be eligible and must show that you have or can accept gifts for down payment and closing costs. With this knowledge, the flexibility of FHA might work better with the following parameters:
- I can’t qualify for a conventional or conforming loan.
- I have been bankrupted in the last two years or more.
- My total debt-to-income (DTI) ratio (a measure of your total debt to income) is higher than the existing maximum of 50% DTI.
- I am buying a home to be repaired with a down payment of 3.5% and you want to include the cost of the repair in your loan amount.
- I need a loan amount equal to or less than the current FHA loan limit for the county you are purchasing. You want to use your rental income to purchase a multifamily home for 2-4 units, live with a 3.5% down payment, and qualify.
- I have a credit score that is between 500 and 619.
- I am eligible for a mortgage from the income of the co-borrowers who will not live in the home.
Annually, FHA helps greater than 1.3 million Americans with FHA Home Mortgage Loans. Contact one of our FHA Lenders and discover how we can help you today!
Understanding FHA Mortgage Insurance
FHA lenders will pay for two types of FHA mortgage insurance to protect FHA lenders against default risk factors. The first is the initial insurance premiums (UFMIP) of 1.75% of your loan amount, which is paid at the closing and usually adds to your delivery balance.
The second is the annual insurance premiums (MIP) which range from 0.45% to 1.05% depending on your payment at the time of the loan. It is paid annually, divided by twelve, and then added to the monthly payment. Here is an example of an FHA mortgage loan you will pay on a $ 300,000 loan, assuming you pay a 3.5% down payment and an annual MIP fee of 0.85%.
Upfront MIP CALCULATION:
- Convert 1.75% to the decimal (0.0175)
- Multiply by the loan amount: 0.0175% x $300,000 = $5,250 FHA UFMIP charge added to your loan amount.
Annual MIP CALCULATION:
- Convert 0.85% to a decimal (0.0085)
- Multiply by the loan amount 0.0085% x $300,000 = $2,550
- $2,550 divided by 12 = $212.50 monthly MIP charge added to your monthly payment
There are some important differences between FHA delivery insurance and personal delivery insurance (PMI):
You will have to pay FHA MIP for your loan period. This is true if you pay a minimum of 3.5% FHA. However, if you can pay an average of 10%, the MIP will disappear after 11 years. You can eliminate this common PMI when you can show that you have a 20% equity.
Your credit score does not affect your finances. Unlike PMI, FHA mortgage insurance is the same regardless of your credit score, which may result in lower monthly payments than loans.
It is more likely that you will have to pay a higher transfer fee (HPML). Because you are paying for two types of FHA delivery insurance, you may find that your APR triggers resistance with “high loans.” You may complete other eligibility procedures to qualify for the HPML FHA loan.
FHA CAIVRS (credit Alert Verification Reporting System)
The Credit Alert Verification Reporting System (CAIVRS) tracks whether people are behind on government-backed loans including:
- Federal student loans
- Small Business Administration (SBA) loans
- U.S. Department of Veterans Affairs (VA) loans
- U.S. Department of Veterans Affairs (VA) loans
If you’ve paid your debt in full or you’re under a repayment plan approved by the agency that you owe, you may be eligible to apply for an FHA loan. Otherwise, you’ll have to wait at least three years after the federal government pays your lender’s insurance claim.
FHA foreclosure and bankruptcy waiting periods
If you lost a home to foreclosure, you’ll need to wait three years before you can take out an FHA loan. With a Chapter 7 bankruptcy you can apply for an FHA loan within two years of your discharge date. This waiting period is much shorter than conventional loans, which require a seven-year wait after a foreclosure or four years after a bankruptcy.
FHA DTI ratio
Your DTI ratio is the percentage of your gross monthly income used to make your monthly debt payments. FHA lenders require a maximum 31% front-end DTI ratio, which focuses on housing payments. Your back-end DTI ratio, which encompasses all of your debt payments — including housing — shouldn’t exceed 43% in most cases.
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