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The Future of FHA Mortgage Lending

December 12th, 2011
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Rick Grant wrote an article published by the National Mortgage News regarding the future role of FHA. In this FHA Assessment Report, Robert Van Order and Anthony Yezer of the George Washington University School of Business for the University’s Center for Real Estate and Urban Analysis considered at the future role of the FHA mortgage programs.

Compare a Mortgage Refinance with FHA

In their first report, the authors concluded that since FHA had captured 56% of the market for first-time and low to moderate income home buyers by 2012, the agency was fulfilling its mission. But with home loans of more than $350,000 having 20% worse default rates, high loan limits increased the agency’s risk significantly. In their second report, the authors concluded that FHA could serve 95% of its historic target market even if loan limits were reduced by nearly 50%.

As the U.S. housing market enters its recovery phase, the co-authors focus their third report on “the factors that are determinants of mortgage risk to ensure that FHA doesn’t layer on excessive risk.” The authors considered these specific issues in their analysis, the balance between low down payments and other loan characteristics, the risk inherent in different loan types and the other factors that also impact overall risk that are not so easily observed. The FHA need not mimic the private sector, but must take care to adjust to changes that represent additional risks.

To explore the relationship between loan to value and FICO score, the authors studied data supplied by the Federal Housing Finance Agency. GSE loans were segmented into four LTV classes and four FICO buckets. The authors looked at FHA loans originated in 2003, a good year for the industry and borrowers, and 2006, well into the downturn.

Assuming that skin in the game (lower LTVs) is enough to prevent default or that high FICO guarantees continued payments leads to error. It’s the layering of risk that matters. For instance, the GSE loans with 95% or greater LTV and with credit scores between 680 and 720 had about the same rate of default as those loans below 75% LTV with low credit scores. Likewise, the economic conditions at the time had a significant impact on default for all LTV and FICO buckets.

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FHA Loan Articles

Сalifornia FHA Conforming Jumbo Loan Limits Lifted fоr 2013

December 7th, 2011
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The housing market on the West coast should see significant benefits from the raised California loan limits on FHA mortgages. Finally after initially rejected higher FHA loan amounts, Congress agreed tо restore, reinstate аnd extend thе jumbo /conforming FHA loan limits tо $729,750 fоr 2013 аftеr sееіng thе negative impact thе October 1st loan limit reduction hаd оn thе сеrtаіn high cost housing markets. The only concern for lenders looking forward is that if defaults continue to rise, so will mortgage insurance premiums. Clearly this could limit Congress to increase the loan amount limits on home loans with FHA as well.

Surprisingly, thе House rejected thе Senate’s bill tо restore оr increase thе conventional (Fannie Mae/Freddie Mac) loan limits.  FHFA announced Conventional home loan financing limits will remain thе same.

Loan amounts bеtwееn $417,000 аnd $729,750 аrе оftеn referred tо аs high balance, jumbo conforming, оr agency jumbo loans.  Тhе FHA conforming & jumbo loan limits hаvе bееn extended thrоugh December 13, 2013.

Whо will benefit mоst frоm thе restored аnd extended jumbo/conforming for a FHA mortgage in California?  What are the loan limits? Clearly borrowers who reside in the higher cost areas of the state will have more opportunities to secure jumbo home financing. What will happen in 2014 is anyone’s guess.

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FHA Guidelines, FHA Loan Articles

Higher Loan Limits with FHA to Spur Home Financing in 2013

December 2nd, 2011
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Congress finally raised thе maximum mortgage limits fоr thе FHA whіlе leaving loan ceilings untouched fоr Fannie Mae аnd Freddie Mac. Most home finance executive believe thіs mау mаkе thе FHA loan even more popular than they already are.  Clearly higher FHA loan limits will help borrowers’ іn high-cost areas. FHA rates remain at the most affordable level they have been in decades so there is significant motivation for American consumers to choose FHA to buy homes or refinance existing home loans.

After а year characterized bу grumpy partisan gridlock, Congress саmе uр wіth а Thanksgiving compromise thаt соuld change thе mortgage choices оf buyers аnd refinancers іn mоrе thаn 660 markets асrоss thе country: Іt raised maximum loan limits fоr thе Federal Housing Administration whіlе leaving loan ceilings untouched fоr Fannie Mae аnd Freddie Mac.

In еffесt, thіs mау mаkе FHA thе solution fоr borrowers needing loans uр tо $729,750 wіth dоwn payments аs low аs 3.5% іn high-cost areas оf California, thе District оf Columbia, Νеw York, Νеw Jersey аnd scattered counties іn оthеr stаtеs including Massachusetts, Florida аnd North Carolina. Fannie Mae- аnd Freddie Mac-eligible loans іn thоsе areas, mеаnwhіlе, stay capped аt $625,500. Congress passed the bill to increase 2013 FHA loan limits so only time will tell how many people will benefit from these jumbo financing opportunities.

Equally іmроrtаnt, thе nеw plan raises thе FHA ceilings fоr purchasers іn hundreds оf mоrе moderate-priced markets. Seattle-area buyers’ maximum FHA loan amount jumped tо $567,500, whіlе thе Fannie Mae-Freddie Mac ceiling remains аt $506,000. Іn Hartford, Conn., thе limit fоr FHA іs nоw $440,000, uр frоm $320,850; Fannie аnd Freddie remain capped аt $417,000.

Buyers wіth low dоwn payments іn Portland, Ore., whо рrеvіоuslу hаd bееn limited tо FHA mortgage loans оf $362,250, саn borrow uр tо $418,750 undеr thе nеw plan, $1,500 mоrе thаn thеу саn gеt frоm Fannie аnd Freddie, whісh generally require steeper dоwn payments аnd higher credit scores.

The nеw loan ceilings іn hundreds оf markets аrе аt thе core оf thе compromise: Тhеу raise thе maximum FHA loan amount іn аll areas оf thе country tо 125% оf thе local median home-sale price, whіlе leaving Fannie Mae’s аnd Freddie Mac’s limit аt 115% оf thе median.

What motivated Congress tо create separate-and-unequal rules thаt transform thе FHA traditionally а haven fоr moderate-income, first-time buyers wіth minimal cash — іntо а key source оf financing fоr buyers іn upper- аs well аs mid-bracket markets?

Nobody іn Congress proposed thіs idea аt thе start. Ву а 60-38 vote іn October, thе Senate passed аn amendment raising аll three agencies’ limits tо $729,750 іn high-cost areas аnd 125% оf thе median sale price еlsеwhеrе. Тhе goal lobbied aggressively bу realty аnd home-building groups — wаs tо inject needed oomph іntо hоmе sales. Вut Republicans іn thе House balked аt dоіng аnуthіng thаt mіght prolong thе existence оf Fannie Mae аnd Freddie Mac, bоth thе targets оf scathing criticism fоr thеіr multibillion-dollar costs tо taxpayers аnd big bonuses fоr top executives.

What ultimately emerged frоm thе legislative scrum wаs thе compromise penalizing Fannie Mae аnd Freddie Mac, whіlе boosting FHA. House Republicans wеrеn’t enthusiastic аbоut helping thе FHA еіthеr — thе agency faces іts оwn financial challenges but unlіkе Fannie аnd Freddie, thе FHA іs subject tо congressional appropriations аnd closer oversight. Republican critics held thеіr noses аnd voted fоr thе plan.

What will thіs mеаn fоr buyers frоm nоw thrоugh thе еnd оf 2013, whеn thе compromise expires? “There’s nо doubt thіs will drive mоrе business tо FHA,” sаіd David Н. Stevens, fоrmеr FHA commissioner аnd current president аnd chief executive оf thе Mortgage Bankers Assn. “FHA іs going tо bесоmе thе darling оf thе industry аgаіn,” sаіd Annie Austin, а loan officer wіth Cobalt Mortgage іn Bellevue, Wash.

Bob Walters, chief economist оf national lender Quicken Loans, sаіd hе thinks thе increased loan limits will benefit mаnу consumers, “еsресіаllу thоsе lооkіng tо borrow larger amounts,” hе sаіd, but whо “аrе іn а credit situation whеrе Fannie Mae аnd Freddie Mac loans аrе nоt аvаіlаblе оr optimal.”

The switch tо thе FHA соuld entail sоmе pain, hоwеvеr. Tim Kepler, а loan officer wіth Land Ноmе Financial іn Danville, Calif., nоtеd thаt thе agency raised іts upfront mortgage insurance premiums frоm 0.5% оf thе loan amount tо 1.15% earlier thіs year. Тhіs will increase applicants’ closing costs оvеr а Fannie оr Freddie loan, hе said.

The premium саn bе financed, but саn add substаntіаllу tо thе costs оf high-balance mortgages. Bruce Calabrese, president оf Equitable Mortgage іn Columbus, Ohio, sаіd thе hefty nеw premiums mаkе “FHA tоо restrictive аnd unattractive” fоr mоst refinancers іn hіs area, еvеn wіth slіghtlу higher loan ceilings.

Bottom lіnе fоr house shoppers: Таkе а hard, close lооk аt FHA wіth а local loan officer, іn light оf thе rule changes. Pencil оut thе costs, down-payment requirements аnd mоrе generous standards оn credit. FHA mау bе уоur best option. Вut thеn аgаіn, thе higher fees јust mіght change уоur mind.

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FHA Loan Articles, FHA News

203K Loans Rehabilitating Homes with No Equity

September 14th, 2011
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The FHA 203K is one of the most popular home improvement loan options for borrowers looking to rehabilitate a residential property. The 203K is a basically rehab loan. Under the 203K loan, FHA allows you to purchase or refinance a home and roll the costs of the rehabilitation project into the mortgage. With house values continuing to struggle, adding in the cost to renovate can still get you a very affordable monthly payment.

As you may already know FHA interest rates are ridiculously low. In today’s mortgage environment, home improvement financing is more difficult to find.  Getting a second mortgage a few years ago was easy but today, most lenders are looking for more equity. The 203K loan doesn’t require equity and FHA allows home equity mortgages up to 115% loan to value. (203k loan is always held in 1st position)

Much like a standard FHA mortgage, consumers can get into a home with only a 3.5% down-payment and FHA allows the seller can assist with the loan closing costs. The FHA loan program is very popular with first time home buyers because of the low down payment. The 203K loan is most attractive to a borrower considering buying or refinancing a property that needs to be fixed up. Whether you need to add a room, remodel, or install a swimming pool, the 203K loan is unique option for financing home improvements.

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FHA Loan Articles

2012 FHA Loan Limits to Fall Soon

August 22nd, 2011
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Lenders and brokers have started to brace themselves for reduced FHA limits coming on September 30th.  MBA, NAR and other housing activists agree that lower loan limits will make it tougher on FHA financing in states with high cost regions. Many FHA loan companies have begun using the reduced FHA loan limits because in most cases the loan process takes 30- 45 days to close.  The common misperception is that it only applies to high-end homes, he said.

2012 FHA loan limits continues to be a highly debated a subject on Capitol Hill.  HUD lifted nationally limits from $417,000 to $625,000 in February 2009 and the FHA limits were extended last year until October 1st, barring action from Congress. The limit was raised from 115% of each county’s median home price to 125% of the median, and is now coming back to 115%. That’s an average reduction of $68,000, making an estimated 5 million homes ineligible for government sponsored-enterprise financing, he said.

FHA is poised to lower loan limits in the country’s high cost regions while limits would remain unchanged in most other parts of the nation. Lower FHA mortgage limits will affect less than 5% of the markets nationally, but it will do doubt have a ripple effect for the struggling housing sector.

Zach Lowe, spokesman for the Washington, D.C.-based Coalition for Sensible Housing Policy, said FHA insurance assists people who can’t afford a large down-payment needed to qualify for traditional home purchase loans. In 2011, the FHA was insuring mortgages up to $729,000 nationally, or 125 % of area median home prices.”

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FHA Guidelines, FHA Loan Articles, Published Loan Articles

What are the Benefits and Risks with an FHA Loan?

August 19th, 2011
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FHA started insuring home loans in 1934.  This government finance agency has helped support millions of first time home buyers over the years. Many people think FHA is only for new home buyers, but FHA offers home refinancing, cash out loans and much more.

The main benefits of FHA mortgages

1) FHA encourages home financing with low down-payments starting at 3.5% of the home sales price.

2) The credit requirements with FHA home loans are more flexible than conventional and private money lenders.

3) FHA refinancing is easy and cost effective if the FHA interest rates should fall at a later date.

FHA also offers a home improvement loans called the FHA 203K. Borrowers can purchase a “fixer-upper” and finance the house rehabilitation.  Since construction loans have disappeared the 203K loan is the only home loan that enables the repairs and renovations to be rolled into the mortgage.

The downside of FHA financing

1) FHA loans usually have more expenses than other conventional home loans because there is mortgage insurance required to be paid upfront prior to closing.

2) Monthly housing expenses are higher than traditional loans because FHA requires a monthly mortgage insurance payment that is due with each loan payment.

3) Each year HUD announces the FHA loan limits. This means that there is maximum amount that can be borrowed and the amounts vary by region.

Read more of Nasdaq’s article online about the basics of FHA loans

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FHA Loan Articles, Published Loan Articles

FHA Mortgage Refinancing Better than Subprime Loans

August 19th, 2011
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The amount of sub-prime loan products being offered these days is drastically decreased from a few years back, before the sub-prime crisis.  Sub-prime mortgages are loans that are made to people who may not be able to maintain the repayment schedule.  They are usually accompanied by higher interest rates and unfavorable terms.  FHA rates are much lower than bad credit mortgage rates and FHA refinancing is available to people with poor credit ratings.  Refinancing with a FHA mortgage provides an opportunity to reduce the monthly mortgage bill, making the repayment schedule easier to maintain.

Sub-prime loan rates mean that the interest can accrue faster than you can pay the loan off.  Refinancing with a FHA mortgage is a great idea because FHA mortgage rates are much lower than sub-prime mortgage rates.  The FHA, or Federal Housing Administration, was founded as a part of the National Housing Act of 1934.  This act was in response to the massive decrease in home ownership and loans during the Great Depression.  The federal government started backing FHA mortgages.  For many years, FHA became a part of the Department of Housing and Urban Development in 1965.  For over thirty years, the agency was completely self-funded, but in 2008, FHA applied to congress for subsidies to stem off the estimated $143,000,000 budget shortfall coming.

Avoid Subprime Refinancing if You Can Qualify for Fixed Rate FHA Mortgage  

The subprime loan crisis had caused a major problem for FHA.  However, FHA rates are much lower than subprime mortgage rates even now.  It stands to reason that refinancing with a FHA is an excellent method of restoring or maintaining credit by avoiding late or skipped mortgage payment.  It is also a good way to avoid either foreclosure or bankruptcy.  To get started in the refinancing process, take a good look at your finances and take care of any problem areas.  Meeting with a financial advisor is a good idea.  There are some great free programs offering financial counseling.

If you have already gotten yourself into a sub-prime loan, you have probably had bad credit at some point.  A financial adviser can help you make a plan for completely correcting your credit that is not skewed by the desire to sell you a mortgage.  They can help you decide if refinancing with a FHA mortgage is the right plan for your particular situation.  FHA Lenders can give you more information on how FHA rates are much lower than sub-prime mortgage rates and what you need to provide to be eligible for government refinancing with the Federal Housing Administration.

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FHA Loan Articles, Refinancing with FHA

Mortgage Loan Limits Set to Fall

August 10th, 2011
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Many people in the mortgage industry are nervous about the impact that lower Fannie Mae, Freddie Mac and FHA loan limits will have next month. If you want to get approved for home refinancing act quickly. Soon, you may face more expensive jumbo loans that are harder to qualify for. That’s what loan professional Mathew Carson of First Capital Group Inc. tells his clients in San Francisco as he warns them about loan limit changes that will take effect October 1st. Conforming loan limits are not the only changes that are taking place, as HUD will roll out the 2012 FHA loan limits that will be significantly lower than limits for 2011.

The maximum amount for jumbo-conforming mortgages which are loans that vary between $417,000 and $729,750 and can be sold to Fannie Mae and Freddie Mac will fall in many parts of the country. The maximum loan limit will be reduced to $625,500. Anyone who wants to refinance or get a purchase loan of more than $417,000 but less than $729,750 is likely to be affected. “There are plenty of people in this range, and when the limit changes they are going to be priced out of the market,” says Carson. “We’ve reached out to all of our clients in that category, and I’m finding that people just don’t know that loan limits are shrinking.”

These loan limits are crucial in high-cost areas such as San Francisco, Los Angeles, New York and New Jersey. That’s because mortgage loans that go over the threshold set by Fannie and Freddie are considered jumbo mortgages, which generally carry higher interest rates, may require larger down payments and have more stringent underwriting guidelines. According to the National Association of Home Builders the decreased jumbo limits will affect more than 200 counties, and about 1.38 million owner-occupied homes would be pushed outside of the jumbo limits allowed by Fannie and Freddie. These government finance agencies temporarily raised their loan limits in 2008. The higher loan limits have been extended annually since then, but are set to expire Sept. 30.

Presently, consumers have access to FHA mortgages of up to $729,750 with 3.5% down. FHA mortgage limits also vary by county and will be lowered at the same time as Fannie Mae and Freddie Mac reduce their loan limits. Borrowers in high-cost regions will not be able to get a FHA home loan over $625,500 after the new limits go into effect.

Read the rest of the here > Fox Business Article.

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FHA Loan Articles, Loan Limits

FHA Refinancing Options

June 27th, 2011
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The FHA Home Loan Blog published a great article today highlighting some issues that homeowners should consider when refinancing.

  1. Refinance now because conventional and FHA loan programs now before conforming limits rise at the end of summer.
  2. Some FHA lenders are more aggressive with approving a bad credit refinance for a borrower with compensating factors.
  3. FHA refinance loans is available to homeowners with a minimum credit score of 500.
  4. FHA mortgage products offer multiple mortgage terms such as 3/1, 5/1, 15-year, 30-year.
  5. FHA requires monthly mortgage insurance on FHA loans

Read the original article online at  http://www.fhahomeloanrefinancing.com/blog/refinance-with-fha/

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FHA Loan Articles, Published Loan Articles

Maximizing Low FHA Loan Rates

May 13th, 2011
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The Mortgage Bankers Association reported that FHA interest rates fell to their lowest level in 2011. The drop in FHA loan rates creates a new opportunity for homeowners to refinance into a lower and more affordable payment.  The lower FHA rates also help pave the way for first time home buyers to get locked into an amazing FHA loan fixed for 30-years. With home prices falling to their lowest level since 2003, this has become a significant opportunity for people to buy low while financing at record low interest rates.

Loan Professionals Have More Time To Surf Because Less Borrowers Qualify

Former Ditech executive, Jeff Morris told the FHA home loan blog in a recent interview, “FHA mortgage rates” could not be any lower, but not enough borrowers qualify for today’s FHA home loans, because banks and lenders have tightened their guidelines beyond reasonable levels for the average American borrower.” Morris said that we should not hold our breath for a recovery in the housing sector until government lenders are more realistic with requirements for refinancing and home financing. With lenders demanding higher credit scores and more equity, refinancing has truly become a commodity.

Suggested Changes that FHA Should Consider Implementing

  1. Revert back to 2009 Rate for FHA Premiums
  2. Eliminate the FHA Minimum Credit Scores –Qualified borrowers have been benefiting from bad credit refinancing
  3. Keep the FHA loan limits at 2008 levels.
  4. Enable homeowners with underwater mortgages to refinance up to 125%

Read the original article > Current FHA Interest Rates

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FHA Guidelines, FHA Loan Articles, FHA News, Published Loan Articles

FHA Short Refinance and Emergency Mortgage Relief Program at Risk

March 4th, 2011
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House Republicans introduced legislation yesterday that aims to put an end to several government initiatives like the FHA short refinance and the Home Affordable Modification Program.  Yesterday they voted to abolish the FHA Short Refi program and the $1 billion Emergency Mortgage Relief Program.

Compare Rates on a FHA Refinance Mortgage

Next week they will look to dismantle the $29 billion Home Affordable Modification Program and the $7 billion Neighborhood Stabilization Program.  Conservative lawmakers made it clear that the Obama refinance programs have failed and now it’s time to shut them down. The argument is that none of these programs are working and that they are a waste of taxpayer dollars.

Will the  Emergency Mortgage Relief Program Be Shut Down?

FHA Commissioner David Stevens continues to support the FHA Short Refinance, which targets underwater, but still current loans; he told a House subcommittee Wednesday that 23 approved FHA lenders are signed up to participate. FHA mortgage rates continue to fall, but not enough borrowers meet the refinance requirements. The bottom line is that millions of homeowners continue to struggle with their homes being worth less than their mortgage.  Lenders will not extend underwater mortgage options unless they are backed by one of these government initiatives. This program requires FHA lenders to write down at least 10% of the principal balance mortgage balance. The problem with the FHA short refi is that none of the mortgage giants want to participate in the loan relief program. Fannie Mae and Freddie Mac do not want to write down principal on loans that are currently performing. To this date only 44 FHA loans have been endorsed for the short refinance program.

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FHA Loan Articles, FHA News

10 Myths about FHA Loans

February 28th, 2011
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There is a lot of false information going around about FHA loans, so we wanted to dispel some of the myths about the FHA loan program.

FHA lending has become an extremely popular choice for financing so it is important that you have the full understanding of FHA mortgages and the power of this government finance option. Today’s FHA rates fell to record levels recently and most mortgage companies have started to offer home loans insured by the FHA as they are truly one of the best government initiatives in our country’s history.

 

FHA Mortgage Loans Have developed a strong reputation over the last 77 years.

Below we listed 10 common myths about FHA loans.

  1.  You do not have to have a government job to qualify for a FHA loan.
  2.  FHA does not stand for Fair Housing Association.
  3.  FHA mortgages are not just for first time home buyers.
  4.  Mortgage insurance is not required with FHA loans on 15–yr terms below 90% LTV.
  5.  FHA does not have a minimum credit score requirement, but many FHA lenders incorporate additional credit score guidelines.
  6.  No cash out is allowed on the FHA Streamline.
  7.  The Max CLTV on a FHA loan is 125%.
  8.  FHA does not allow cash out refinancing to 95%.
  9.  FHA does offer home rehabilitation loans to 115%
  10.  FHA will not approve a loan to borrowers who defaulted on federal government loans

With foreclosure rates and loan defaults rising, you can expect FHA to continue modifying the FHA mortgage products on a regular basis, so check back our blog and stay up to speed.

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FHA Lending, FHA Loan Articles

What is an FHA Loan?

February 28th, 2011
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Over the last 5 years, FHA financing programs have been the hottest mortgage product on the market, but many consumers do not really know what a FHA loan consists of.  The Federal Housing Administration was created in 1934, although its purpose has changed somewhat since it was originally put together. Originally, the administration was created to help reduce unemployment and increase home construction. Today, the FHA serves primarily to help those who cannot normally afford housing to purchase homes. FHA loan programs are for borrowers who want to refinance or purchase a home.

How to Qualify for a FHA Loan

Here, we’ll go over just what is an FHA loan, as well as how you can take advantage of these services if you want to own a home but cannot normally afford one. FHA loans are essentially mortgages that work as a kind of federal assistance, and are designed to help Americans with lower incomes borrow money for purchasing homes. The proper term for the loan is an FHA insured loan, because the Federal Housing Administration does not actually give out the loan itself. Instead, FHA lenders have the client pay a mortgage insurance premium, or MIP, that equals a percentage of the amount of the loan at closing. This is typically financed by the lender and paid to the FHA on behalf of the borrower. Today there are private mortgage insurance companies, which work with the FHA to help those that are not able to afford a conventional down payment or who do not otherwise qualify for PMI programs.

An FHA mortgage loan can be a valuable tool for those that want to buy a home, but who do not have the starting capital to be able to place a down payment. FHA loans can only originate from government approved lenders. However, they come in a variety of forms so keep in mind the fact that different lenders have different interest rates, terms and conditions, and other factors is important. Shopping around and comparing the various aspects of loans from different lenders is the best way to ensure you don’t pay more than you need to.

FHA loans can be adjusted based on your needs. Options such as the hybrid adjustable rate, which allows borrowers to finance their mortgages, and down payment grants are a good way to make the loan work better for you. Borrowers can also take advantage of section 251, which insures home purchases and refinanced loans to allow interest rates to be lowered over time. There are a number of ways in which you can make an FHA mortgage meet your specific needs, allowing you to get the house you’ve always wanted at a price you can afford to pay over the correct amount of time.

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FHA Lending, FHA Loan Articles

FHA Loans for Borrowers with Less Than Perfect Credit

February 7th, 2011

Nationwide lenders announced a FHA loan program that may open the door for loan applicants that have been rejected for mortgage refinancing or home buying because of their low fico scores.  Borrowers with credit scores between 500-640 FICO may still be eligible for home mortgage purchase loans and FHA refinancing.  In a recent article, Bloomberg indicated that there are 6.3 million borrowers in the 620-640 FICO range alone.  Save money with reduced monthly payments that are a reality with a FHA mortgage loan.  Read the complete Nationwide post online, Second Chance Loans with FHA.

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FHA Credit, FHA Loan Articles

Best FHA Loan Programs

January 21st, 2011
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FHA loan programs continue to support a majority of the home financing sector this year. With FHA mortgage rates on the rise, it’s a good idea for homeowners to refinance if they have an adjustable rate mortgage while rates are still low.  If you are considering buying a home, now is an opportune time because home prices have fallen and financing is extremely affordable.

New Homebuyer Option- New home buyers only need a 3.5% down-payment to qualify for a government insured mortgage.

FHA Refinancing – You do not need much equity to qualify if you just want to redo your current mortgage. The FHA refinance option enables borrowing up to 96.5%.

Streamline Refinance – If you presently have a FHA mortgage, the FHA streamline refinance is highly regarded because of it’s flexibility.

Cash Refinance - HUD lowered the LTV restrictions from 95% to 85% for borrowers that want to receive money back when in a refinance transaction.

Home Improvement- The 203K loan is similar to a home improvement loan for the rehabilitation of single family homes that meets HUD’s requirements.  Finance to 115%.

Read the original FHA Blog Article > FHA Mortgage Loan Programs

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FHA Loan Articles, Published Loan Articles

FHA 203K Loan for Home Improvements

January 14th, 2011

FHA continues to offer rehabilitation solutions for home improvement financing with the 203K loan.  This FHA loan program is unique and not that many FHA lenders offer the full array of this type of home financing.

The FHA 203K home loan is considered a streamlined rehabilitation home loan and mortgage insurance implications are applicable.  The 203K loan is different than your traditional home improvement loan that needs equity for eligibility, because it enables financing to 115%.  FHA loan rates may var, so check with your loan officer for current pricing.

If you have a borrower who is interested check their eligibility and refer to the FHA 203k guidelines from HUD.

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FHA Loan Articles, Home Rehabilitation

2011 FHA Limits

January 11th, 2011
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Many mortgage professionals feared that Congress would reduce 2011 FHA loan limits in an effort to further tighten lending and mitigate fraud that has devastated the United States housing sector and economy in general.  If congress decreased FHA limits than many borrowers would be unable to refinance because their existing mortgage would exceed the 2011 FHA loan limits.  Fortunately, Congress approved a temporary extension for the current FHA loan limits and that offers a least a glimpse of hope for homeowners struggling to get approved for FHA loan refinancing that would lower their monthly payment.

Many FHA lenders have feared privately that Congress may allow the conforming and FHA limits to fall when the bill setting mortgage limits expires September, 2011. Tightening FHA guidelines sounds great and looks good on paper, but the reality is that too much tightening can completely strangle the housing market and the cash flow most Americans have become accustomed too.

Let’s be honest and look at the reality of the mortgage industry.  Millions of Americans own homes and if they can document that they can afford a refinance loan for a home that they already have, then the FHA lender should approve the loan and move on.  If a borrower can document to a FHA lender that reducing their interest rate to a competitive level of today’s current FHA rates will increase the likelihood of them paying their mortgage on time, then the lender should approve the mortgage refinance and move on — Isn’t that what a loan modification is any way.

The U.S. government took tax payer dollars and distributed it to the banks so that they would lend more money to homeowners and small business.  Unfortunately the banks did not oversee and mandate the increased FHA lending and liquidity. The fact remains that FHA credit guidelines have tightened significantly in the last 12 months.  The FHA streamline continues to have a few loop holes that are in fact helping FHA borrowers refinance, but you must already have a FHA loan to qualify for the streamline refinance program.

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FHA Credit, FHA Guidelines, FHA Lending, FHA Loan Articles

Is FHA Eliminating Adjustable Rate Loans?

October 4th, 2010
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Today you can find FHA mortgage rates as low as 3.625% on the 5/1 ARM program.  This is a popular loan because it offers an amazing fixed rate for 5 years.  After the fifth year it becomes an adjustable interest rate unless the borrower refinances or sells their home.  FHA Loan Pros recently reported that the several banks offering government loan products were about to drop the FHA ARM option.  According to Lead Planet economist, Kevin Grant, “There are certainly are rumors in the mortgage circles that HUD will eliminate their FHA ARM products in 2011.”  Grant continues, “As a company that sells mortgage leads to banks and lenders we get a lot of feedback from lending companies and most FHA lenders do not want to get burned when the interest rate converts to a variable rate term, especially since 30-year fixed rate mortgages are published at 4.375%.”.FHA Loan Pros came right out and asked last week, “Why would anyone want an ARM in today’s market?”

A few days ago, Freddie Mac reported that you could get a 30-year fixed-rate mortgage at 4.37%. At the same time, the 5-year Treasury-indexed ARM had a start rate of 3.54% while the 1-year Treasury ARM began at 3.40%.   Yes FHA rates below 4% are appealing but the 15 or 30-year term offers so much more security. Recent published reports indicated that in 2010 ARMs equal just 2.7% of all FHA loan originations. On the flipside, for new homebuyers in high cost regions the difference between the 5/1 ARM and the 30-year fixed rate is several hundred dollars a month.  Besides there are borrowers that are quite sure they will be in their home for less than 5 years, so why not extend them this option.

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FHA Loan Talk

September 29th, 2010
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According to FHA Loan Pros, credit scores on FHA home loans are now averaging a respectable 695, that’s up from 662 a year ago. The finance publisher notes that with the challenges of the economy and the tighter lending guidelines that it would be difficult to imagine many consumers getting approved FHA mortgage loans with fico scores below 600 in today’s world.

But such a process reflects how mortgages used to be made, something archaic in the new world of automated credit scores and secondary markets where loans are instantly bought and sold. As well, the old system could easily be discriminatory and often was.  The combination of a low credit score and a 10% down payment is unlikely but in the past these types of bad credit borrowers were able to finance using the FHA loan programs.

HUD is seeking to re-shape the mortgage market by requiring borrowers to demonstrate more financial responsibility and credit capacity. That’s a reasonable standard, especially given the loose guidelines outside the FHA loan programs which led to a significant rise in foreclosures and economic distress during the past few years.  FHA rates remain at record low levels, so the likelihood of FHA refinance and purchase activity continuing to rise.

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Annual Loan Fees Are Raised for FHA Home Loans

August 6th, 2010
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After considering increasing the FHA loan costs, the Federal Housing Administration decided to turn the talk into increased revenues.  The FHA came together in agreement today that starting September 7th to raise the annual fees for FHA loans insured by the agency in an effort to strengthen its cash-strapped balance sheet.  Earlier this week, the Senate extended their approval for a bill that enables the FHA to raise their annual fees that borrowers who have an FHA mortgage pay by nearly 300%. However, a spokesman for the FHA said that their initial plans will begin with modest increases of the loan fees at first. President Barack Obama is expected to sign the FHA bill later this month.  HUD announced earlier today that they have a new FHA refinance loan called the FHA short refinance and this program was created to extend loan relief to distressed borrowers.

Will the Icreased Annual FHA Fees Reduce Homeownership?

The new law would grant FHA the authority to increase annual mortgage insurance premiums paid by the borrower over the life of FHA home loans capping out at a maximum of 1.5 %.  Presently, the annual mortgage insurance is limited to 0.55%.  However, FHA Commissioner David Stevens indicated that the mortgage premium would be raised gradually, first to 0.85 % or 0.9 %, depending on the size of the borrower’s down payment. The new FHA loan costs are expected to increase about $3.6 billion annually for the FHA.

The good news for new homebuyers is that FHA promised to reduce the upfront mortgage insurance premium from the current 2.25% to about 1% and the agency hopes that this helps offset the increased cost of the annual premium for FHA borrowers. The upfront premium is paid prior to the FHA loan closing.  Stevens has said it makes more sense for the fees to be paid throughout the life of the loan in the annual premium instead of forcing borrowers to pay them when the loan is made.  New borrowers would pay an average of just under $40 per month more under the new fee structure.  The minimum down-payments for FHA loans remain at 3.5% for most homebuyers. Lawmakers struck down a Republican proposal to raise them to 5%.

The FHA has capital reserves equal to just 0.53% of the value of the thousands of outstanding mortgage loans that they insure.  Many mortgage executives have been troubled by this because it is well below the 2.0% required by law, according to an independent actuarial study released late last year. A new study is expected to be released this fall.  In addition to raising the FHA annual fees, the House has also passed another finance bill that was created in an effort to strengthen the FHA’s enforcement capabilities.

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