What Is A FHA Loan

What Is A FHA Loan



What is​ a​ FHA Loan?
Most of​ us need to​ borrow some money at​ least at​ one point of​ time in​ our life. When we want to​ buy a​ car,​ to​ study at​ the​ College or​ University,​ when we want to​ buy a​ house or​ home,​ when we need money to​ start our own business even when we use our credit cards.

There are many types of​ loans and mortgages,​ such as​ FHA loans,​ Student loans,​ College loans,​ Business loans,​ Personal loans,​ Commercial loans,​ Payday loans,​ Auto loans,​ Car loans,​ Vehicle loans,​ Mobile home loans,​ Motorcycle loans,​ Military loans,​ Construction loans,​ Home loans,​ house loans,​ home equity loans,​ Bridge loans,​ Disaster loans,​ farm operating loans,​ Agriculture loans,​ Debt consolidation loans,​ Direct Loans,​ Government loans,​ Unsecured loans,​ refinance/remortgage loans,​ Bad credit loans,​ etc. ,​ just to​ name a​ few.

Within each loan term there are additional sub terms such as​ Fixed rate vs. Variable rate,​ Adjustable rate,​ ARM,​ PITI,​ HELOC,​ Balloon Mortgage,​ reverse mortgage,​ and other bewildering financial terms we will try to​ clarify here.

What is​ FHA?
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,​ single family and multifamily properties,​ and some health related facilities.

The two very basic terms you​ need to​ understand is​ A. PITI and B. 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​ following
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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