The Fha Loan Basics

The Fha Loan Basics



The FHA Loan Basics
FHA loans are a​ great option for anyone looking to​ buy a​ home with little money for a​ down payment .​
In general,​ FHA loans require only a​ 3% down payment .​
In addition to​ the​ low down payment,​ there are several aspects of​ FHA loans that can help you​ decide if​ an​ FHA loan is​ the​ best option for you.
The basic FHA loan,​ 203(b),​ can be used to​ finance the​ purchase of​ a​ new or​ existing,​ one- to​ four-family,​ owner occupied,​ dwelling .​
This means that an​ FHA loan could be used for places such as​ condominiums,​ townhouses,​ duplexes,​ or​ traditional homes as​ long as​ the​ residence is​ being used as​ the​ borrower’s residence.
There is​ also a​ 203(k) loan,​ which is​ available to​ rehabilitate an​ existing residential dwelling .​
This loan allows the​ borrower to​ receive a​ loan based on​ the​ appraisal of​ the​ property with specified improvements .​
There are a​ variety of​ repairs and improvements that could be covered by this type of​ loan,​ including replacing floors,​ tile,​ carpet,​ roofing,​ siding,​ plumbing,​ electrical work,​ major landscaping,​ and patios .​
Mortgage payments can be postponed up to​ six months while repairs are being completed if​ the​ residence is​ uninhabited .​
Tax or​ insurance payments may still be required during this time period.
The amount provided by FHA loans is​ limited by the​ median house price in​ a​ region as​ well as​ the​ FNMA and FHLMC loan amounts .​
To see what the​ loan limits are for your area,​ you​ can go to​ https://entp.hud.gov/idapp/html/hicostlook.cfm.
FHA loans can have fixed or​ adjustable rates .​
FHA ARM loans have the​ same qualification guidelines as​ fixed-rate mortgages .​
They also have an​ interest-rate increase cap of​ 1 percent per year and 5 percent over the​ life of​ the​ loan.
Mortgage insurance premiums (MIPs) are required with FHA loans .​
There are two types of​ MIPs associated with FHA loans: initial premiums,​ which are paid at​ the​ time of​ closing,​ and renewal premiums,​ which are paid as​ part of​ the​ monthly payment .​
The rates charged are based on​ the​ terms of​ the​ loan and the​ amount of​ the​ down payment .​
The MIPs renewal premium is​ dropped when the​ equity reaches 22%.
In addition to​ these FHA basics there are many details which are important to​ understand .​
a​ great resource is​ a​ good lender .​
The FHA has given certain status to​ lenders that can underwrite and approve FHA loans .​
These lenders have a​ Direct Endorsement or​ DE .​
Making sure that your lender has their DE will ensure more efficient handling of​ your loan and your questions.




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