What Is FHA Loan

What is​ FHA loan?
Home mortgages are important part of​ the​ loans universe but we will concentrate here on​ a​ specific one called FHA. the​ Federal Housing Administration FHA,​ a​ wholly owned government corporation,​ was established under the​ National Housing Act of​ 1934 to​ improve housing standards and conditions. Its goal was to​ provide an adequate home financing system through insurance of​ mortgages,​ and to​ stabilize the​ mortgage market.
FHA is​ not a​ loan,​ It’s an Insurance! if​ a​ home buyer defaults,​ the​ lender is​ paid from the​ insurance fund. An FHA loan allows you​ to​ buy a​ house with as​ little as​ 3% down payment,​ instead of​ the​ higher percentages required to​ secure many conventional loans. Taking advantage of​ the​ FHA loan program is​ a​ great way for first time buyers,​ or​ anyone with a​ shortage of​ down payment funds,​ to​ buy a​ home. it​ is​ not a​ program reserved only for first time home buyers. you​ can buy your third or​ fourth home with an FHA loan. the​ only stipulation is​ that you​ may only have one FHA loan at​ a​ time.
FHA helps low and moderate income families purchase homes by keeping the​ initial costs down. By serving as​ an umbrella under which lenders have the​ confidence to​ extend loans to​ those who may not meet conventional loan requirements,​ FHAs mortgage insurance allows individuals to​ qualify who may have been previously denied for a​ home loan by conventional underwriting guidelines. it​ also protects lenders against loan default on​ mortgages for properties that include manufactured homes,​ singlefamily and multifamily properties,​ and some health related facilities.
The two very basic terms you​ need to​ understand is​ PITI and Long Term Debt. PITI stands for Principle,​ Interest,​ Taxes,​ and Insurance. it​ is​ with relations to​ your Mortgage and property housing total monthly cost. Your maximum PITI should not exceed 29% of​ your gross monthly income.

Long term debt includes such things as​ car loans and credit cards balances.
In order to​ qualify for FHA loan your PITI + Long Term Debt should not exceed 41% of​ gross monthly income.
This is​ much lenient terms compared to​ conventional loan terms of​ maximum
PITI of​ 26% 28% and Total PITI + Long Term Debt of​ 33% 36%.
Qualifying for an FHA loan you​ need the​ followings
Good credit history that shows you​ meet your financial obligations.
PITI + Long Term Debt not to​ exceed 41% of​ gross monthly income.
Sufficient cash down payment at​ time of​ closing. 3% of​ the​ total cost.
Closing expenses cost of​ 2%3% of​ the​ price of​ the​ house.
Homeowner’s Insurance,​ Attorney’s fees,​ title fees,​ and title insurance,​
Private Mortgage Insurance if​ you​ are paying less than 20% down,​ the​ loan
origination fee,​ and a​ fee that goes into the​ FHA insurance fund.

The FHA ARM Adjustable Rate Mortgages is​ a​ HUD US Department of​ Housing and Urban Development,​ mortgage specifically designed for low and moderate income families who are trying to​ make the​ transition into home ownership. at​ the​ time it​ is​ issued,​ the​ ARM usually has an interest rate several percentage points below a​ fixed rate mortgage. the​ interest rate can change as​ market conditions change. if​ interest rates go up,​ so does your mortgage payment. if​ they come down,​ your mortgage payment comes down,​ too.

The reverse mortgage is​ often of​ interest to​ senior homeowners. This loan provides cash for living,​ health or​ other expenses. Payments are made to​ the​ borrower in​ a​ lump sum or​ monthly. Most reverse mortgages are issued to​ those 62 and older who own a​ debt free home with no tax liens.
A Home Equity Line of​ Credit HELOC lets you​ use equity in​ your home to​ pay for home improvements,​ debt consolidation or​ other financial goals. With an acceptable debt,​ credit and employment history,​ you​ may be able to​ borrow up to​ 85% of​ the​ appraised equity in​ your home.
Balloon Mortgage the​ buyer pays interest for three to​ five years on​ a​ balloon mortgage. After that the​ entire principal comes due all at​ once.

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