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FHA Mortgage Loans

Since its creation in the 1930’s FHA has evolved into a primary loan for many homebuyers.  With as little as 3.5% downpayment any homebuyer can get into the home of their dreams.  FHA allows gifts for downpayment, seller contributions to cover all closing costs and flexible credit qualifying.   You do NOT have to be a first-time buyer to enjoy the benefits of FHA.

With these benefits, does come a cost.  FHA loans requires mortgage insurance which is typically more expensive than conventional mortgage insurance.  Here’s a piece on the costs of FHA mortgage insurance.  So it’s worth a careful comparison to be sure FHA is your best route.

A little about “the FHA”
 
The Federal Housing Administration (FHA) was created out of the National Housing Act of 1934, and was established to increase home construction, reduce unemployment and insure mortgage loans.  With the Great Depression of the 1930s, the rates of foreclosures and defaults rose sharply.  The FHA loan programs were designed to find solutions for homeowners and to encourage banks to lend.

Since  1934, the FHA has insured millions of home mortgages.  In 2009 alone (and in the middle of the modern mortgage crisis), the FHA insured nearly 2 million loans, which included 750,000 first-time home buyers. In fact FHA loans grew to a market share of 30% of all originations in 2010 vs only 3% in 2007.  

While most people believe that the FHA lends money directly to borrowers, it actually just insures a certain type of loan that is financed by traditional banks and mortgage lenders.

Types of FHA Loans

Four of the most visible single family housing programs that FHA offers are, Section 203(b), Section 234(c), Section 203(k) and Home Equity Conversion Mortgages (HECM) –Reverse Mortgages.

Section 203(b)
  • largest of FHA's singe family loan programs
  • 1-4 unit properties are
    eligible
  • flexible credit requirements
  • 3.5% minimum down payment
  • downpayment may be a gift from specific sources (including a family
    member)
Section 234(c)
  • provides mortgage insurance for individual condominium 
    units
  • same credit, downpayment and loan limits of 203(b)
    apply
  • with changes in 2010, condominium complexes must be
    approved through HRAP/DELRAP to be eligible for FHA insurance
Section 203(k)
  • primary program for property rehabilitation
  • encourages community and neighborhood revitalization
  • only 1 mortgage loan is used for both the acquisition and the renovation of the home
  • 1-4 unit properties including condominiums are eligible
  • required improvements include cost effective energy conservation standards and smoke detectors
  • consultancy may be required
HECM – Reverse Mortgages 
  • FHA was the first to promote reverse mortgages nationally
  • allows access to equity in property with flexible terms
  • lump sum, monthly payments, line of credit or a combination available
  • limited to homeowners 62 years of age and older
 
FHA programs go beyond the scope of the previously listed programs. They offer a Streamline Refinance as well as a Streamline 203(k) for limited repairs. Also, recent legislation has helped FHA offer special programs with incentives to lenders for modifying and refinancing existing mortgages like with the “Making Home Affordable Program.”
 
When looking for a loan program to fit your specific needs, take a close look at FHA as their programs have become more attractive to both lenders and consumers.

 With favorable loan terms, higher loan limits, 30 year fixed repayment terms and flexible down payment options, FHA will continue to encourage home ownership, provide liquidity and stability to the mortgage market.

Frequently Asked FHA Questions:

Q. What are the minimumm credit score requirements for an FHA loan?
Most lenders will require a minimum credit score of 620.  There are possibly options below this score.  Regardless of score each prospective client would get a careful pre-qualification to confirm available loan options.

Q. How much can I afford?
To truly answer this question, we want to pre-qualify each prospective client.  We can review all your options including FHA, the required documentation need and provide a detailed analysis that would include your maximum loan amount.  You can start here.

Q. How will I know if the condo/townhome I want to buy is eligible for FHA financing?
The following link will allow you to enter your zip code for a list of eligible properties.


 

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TEXAS CONSUMER NOTICE
CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE COMPANY OR A LICENSED MORTGAGE RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.  THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT-OF-POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED MORTGAGE COMPANY RESIDENTIAL MORTGAGE LOAN ORGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.

                                                                    www.sml.texas.gov/ConsumerInformation/tdsml_recovery_fund_claims.html

Copyright © 2015-2019   |  Paul Enos, Residential Mortgage Loan Originator, NMLS # 350086
First American Mortgage, Company NMLS # 312233, www.famctx.com
4926 Spicewood Springs Road #100, Austin, TX 78759