Introduction / Why would someone want to use this FHA loan program?
The Federal Housing Administration (FHA) loans were created to provide homeownership opportunities for America’s middle-class families. The FHA program is an insured loan, backed by the federal government. These loans allow borrowers to purchase a home with as little as 3.5 percent down payment. The FHA is a good program for someone who needs to buy a house, but has little down payment money. It is also the best option for someone who wants to purchase a home with a low down payment, but cannot meet the stricter qualifications of other federal programs such as the VA loans. However, there are some drawbacks with the FHA loan program that you need to fully understand before you enroll in these loans. This article will cover some of these things and help you understand why someone would want to use this type of loan.
In order to qualify for a FHA loan, you will need to complete an FHA-approved course on budgeting and financial management. The course is available through HUD-approved housing counseling agencies.
What is the FHA Loan Program and How Are FHA Loans Made Available?
The basic premise of this loan type is that lenders insure the loans they make. The FHA insures the interest-only portion of the loan, which means that borrowers pay only closing costs on their FHA-insured loans and do not have to pay monthly mortgage or insurance payments. FHA-insured loans require a minimal down payment. The maximum loan amount for single-family homes is $314,827 as of 2014. The maximum loan limits for two-to eight-family dwellings are $453,100 and $532,525 respectively.
Borrowers must pay mortgage insurance premiums that protect the lender in case of default and other costs associated with purchasing the home by paying points to lower the interest rate on their loans. MBR does not charge points for FHA loans.
FHA loans may be used to buy new or existing homes, as long as the home meets FHA underwriting guidelines.
Depending on the type of FHA loan program you are looking for, and the lender you choose, you have a choice between two different types of FHA loans. For single-family homes:
For 2 or more family dwellings:
After July 1, 2008, lenders can only choose “Fixed Rate” FHA loans because other types were phased out in 2007.
The following types of mortgage insurance cannot be added to FHA loans:
How does FHA work and what makes it different from other lending programs?
All FHA loans must be insured by the federal government. Unlike conventional insurance, which is a risk-based pricing model, FHA insures based on the credit risk of the applicant. If a borrower purchases that property owner loses the value of their home and any property that they have financed with the home. In other words, the homeowner is the insurer.
The FHA requires a minimum 5% down payment, which is permitted to be at least 3.5% of the purchase price of the home if refinanced. The FHA does not require that borrowers have an actual job and does not require monthly mortgage payments for borrowers who have been unemployed for 90 days or more in any 12-month period.
Because FHA does not require down payments, it has become popular with people who would otherwise be unable to purchase a home. For example, in the 1980s and 1990s, FHA was the main source of financing for veterans, who were eligible for government benefits in the form of GI Bill education benefits, but not able to buy housing.
Homebuyers with bad credit can get a better chance at qualifying for an FHA loan than they would with most private lenders. This is because FHA requires only a credit check, not an employment or income verification.
The Detrimental Impact of a Mortgage Refinance in Today’s Market Economy
Given the current economic climate, refinancing a mortgage with a home equity loan may be the only option for many consumers. Financing solutions are extremely important during these difficult economic times. A refinanced mortgage may be a good solution to the consumer facing the following challenges:
A consumer should consider refinancing an existing mortgage during difficult economic times because they may be able to refinance a high-interest rate mortgage. Refinancing to a lower interest rate will result in lower monthly payments and help the consumer to maintain their individual budget.
Those who are facing a foreclosure should consider refinancing their loan. Individuals facing foreclosure are more likely to be approved for a new loan and they can also save money by refinancing their existing loan into one with a lower interest rate. However, those facing foreclosure should not be encouraged to refinance by giving false promises of lower payments. By refinancing into an adjustable rate mortgage, their payment may actually increase when the interest rate resets.
Frequently Asked Questions About Refinancing Mortgage Rates & Interest Rates Today | Mortgage Rates | 7-Day Mortgage Rate Trend Forecast.com – The Best Rate Alerts & News on Home Loans & Mortgages
Why have the rates increased? Since April of 2012, the Federal Funds rate has been decreased making rates available for borrowers that were at or near a low for the year as well as borrowers with shorter term loans. In addition, lenders have been expanding their loan programs to include lower down payment and longer terms. As a result, the competition in the borrowing market has become more ‘intense’ and lenders have had to increase their rates to remain competitive.
What are the current rates? For a current snapshot of today’s best rates on all mortgage types, please go to 7-Day Mortgage Rate Trend.com
The Federal Funds Rate (NYSE:FFR) is the interest rate at which depository institutions can borrow money from the Federal Reserve. The rate influences interest rates on loans, savings and checking accounts, mortgages and other sources of funds. It also affects the dollar value of U.S. bonds and Treasury securities that are traded in the secondary market (the market for loans or securities that are not held by retail or institutional investors). All these factors feed into the cost of borrowing money, which affects millions of consumers every day.
The Federal Funds Rate affects the cost of money for all types of loans, including mortgage loans, credit cards and auto loans. It is found on the advance rate for each day at this web site: http://www.federalfundsrate.com/ .