What is an FHA Loan?

| 203(k) & 203(k) Streamline | Streamline Refinance | $100 Down Payment HUD Home Purchase Program |

You've heard the name before, but did you know that FHA financing is one of the most popular ways to become a homeowner or refinance an existing mortgage. FHA's mortgage insurance programs help low- and moderate-income families become homeowners by lowering some of the costs of their mortgage loans. FHA mortgage insurance also encourages mortgage companies to make loans to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, by protecting the mortgage company against loan default on mortgages for properties that meet certain minimum requirements--including manufactured homes, single-family and multifamily properties. We are a top provider of FHA Home Loans in Minnesota, Wisconsin. 

$8000 Tax Credit (cash to you from the Government) for buying a home! ASK me for the details!

FHA LOANS vs. Conventional Financing

Find out why more and more people are turning back to FHA!
Although there are similarities between FHA and Conventional mortgage loans there are also some big differences. While interest rates are similar, credit guidelines are different. FHA allows for borrowers with less than perfect credit to receive the same interest rate as a borrower with unblemished credit. Low down payment conventional financing, like FLEX 97, are much harder to qualify for these days. Minimum credit scores are much higher, and private mortgage insurance is double the cost of FHA.

Most applicants are inundated with a variety of terms describing mortgages that are available on the market. The most popular include, Conforming, FHA, and VA.

FHA was created by the Federal Government to provide affordable housing financing for qualified borrowers. FHA insures to 100% of the loan, eliminating the lender's risk. The borrower pays a small upfront insurance premium, called MIP, which is added to the loan amount. The borrower also pays a monthly premium of .55% of the loan amount divided by 12 months.

After January 1, 2009, FHA REQUIRES a 3.5% down payment. This money can be a gift from a blood relative, of true community, state, or city program.

No reserves are required. There are also Closing costs which need to be paid, but almost 100% of the time, these closing costs can be financed into the loan amount by having the seller pay them. Seller paid closing costs really is simply a fancy term by which you are allowed to "roll" your closing costs into the loan, and pay them over the life of the loan, versus having to come up with the money today out of pocket.

Borrowers must provide proof of sufficient income to show ability to pay the mortgage. FHA guidelines are more relaxed, such as; a bankruptcy that was discharged at least 2 years ago, the use of alternative credit (utilities, cable TV, auto or medical insurance premiums, child care, school tuition, furniture or appliance store accounts) in lieu of traditional credit, and higher debt to income ratios. FHA interest rates are extremely competitive with conventional rates.

We are an Official HUD Certified (Department of Housing and Urban Development) FHA Provider for Minnesota and Wisconsin

FHA Home Loan Down payment requirements can be low. In contrast to conventional mortgage products, which frequently require down payments of 5-10 percent or more of the purchase price of the home, single-family mortgages insured by FHA make it possible to reduce down payments to as little as 3.50% percent.

FHA closing costs can be financed, up to 6% of the purchase price. With most conventional loans, the maximum is just 3%. Typically borrower must pay, at the time of purchase, closing costs (the many fees and charges associated with buying a home). This program allows the borrower to finance many of these charges, thus reducing the up-front cost of buying a home. FHA mortgage insurance is not free: borrowers pay an up-front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.

Some fees are limited. FHA rules impose limits on some of the fees that mortgage companies may charge in making a loan. For example, the loan origination fee charged by the mortgage company for the administrative cost of processing the loan may not exceed one percent of the amount of the mortgage.

HUD FHA Loan Limits. Limits on the loan amount. To make sure that its programs serve low and moderate-income people, FHA sets limits on the dollar value of the mortgage loan. It is always changing, and does vary depending on which county the property is located. Use our FREE Loan Limit Lookup Tool to find out the limits in your area.

Fannie Mae & Freddie Mac loans are conventional loans made at the risk of the lender without benefit of any government guarantee or government insurance. A conventional loan with an LTV (loan to value ratio) of greater than 80% requires primary mortgage insurance, which can be paid monthly. The borrower must (usually) have 5% of his/her own funds for the down payment. There are still some 3% down conventional loans, but they are super hard to qualify for.

Requirements of a conventional loan applicant include excellent credit, job stability with sufficient income, a sizable down payment, and low debt to income ratios. Borrowers who meet Fannie Mae or Freddie Mac conventional guidelines are rewarded with an interest rate only slightly lower than an FHA interest rate.

FHA Mortgage Insurance. Mortgage insurance is required under all programs where the borrower does not put at least 20% down payment. Under the OLD FHA rules, mortgage insurance was required for the entire loan period. Conventional loans are able to eliminate mortgage insurance when you reach 80% loan-to-value (20% equity). A BIG advantage over FHA. NOT ANYMORE! FHA mortgage insurance is eliminated when you get to 78% loan-to-value (22% equity) by making payments, just like conventional loans!

The FHA Streamline Refinance

If you currently have an FHA mortgage you are eligible for one of the simplest money saving refinances available today.

The FHA Streamline Refinance allows existing FHA borrowers to reduce their interest rate without having to jump through a lot of hoops. Basically, if you have made on time payments on your current FHA loan for the past 12 months. You get (almost) an automatic approval for the streamline refinance! No income qualifying, no appraisal. How easy is that?

Non-conforming Bad Credit, Sub-prime, Alt-A Loans Gone

Lenders, and the crazy lender days from 2000 - 2006 are long gone. Bad credit, sub-prime, stated income, no doc, Alt-A, and everything else crazy is no longer available.

FHA is your best option if you are a weak credit risk, but FHA it is NOT a bad credit loan. You have to qualify, it has to make sense, and you have to have a little skin in the game (down payment).

The FHA 203(k) Renovation Loan, and the 203(k) Streamline

The COMPLETE Home Buyers Guide to Financing Your Home  Understanding Your FICO Credit Score  Knowing and Understanding Your Credit  #1 Mistake People Make When Buying a Home

These loans are NOT what people think they are, and the vast majority of people inquirying about these loans do not end of getting one.

The FHA 203(k) loan offers flexible qualifying and low down payments:

• FHA standard guidelines
• Standard FHA down payment
• Flexible credit qualifying
• Assumable loans
• Finance up to 6 months of mortgage payments
• Purchase or Refinance and Improve all in one loan

The 203(k) loan program offers borrowers the resources to rehabilitate a home that may be in need of repair, either the home that they currently live in, or that special fixer-upper opportunity. One single loan is used to pay for the purchase (or refinance) and the cost of renovating the home.

Made available to certain lenders by the U.S. Department of Housing and Urban Development (HUD), the FHA 203(k) program has already provided many buyers with the funds necessary to buy their first home, or greatly improve a current home. The FHA 203(k) loan is available to borrowers of all income levels, to homeowners who plan to occupy the house, and for homes with one to four units.

203K Eligible Borrowers:

• Owner Occupants - Purchase - Refinance
• Non- Profits
• Investors NOT allowed

Types of 203K Loans:

• 30 or 15 year fixed rates
• One year ARMS
• Assumable to a qualified buyer, with no money down

Eligible Properties:

• Single family dwellings
• Condominium
• Townhouse
• Mixed Use (Storefront)
• 1-4 Unit buildings- you can increase or decrease the number of units with this loan.

Structural Alteration and Reconstruction:

• Changes for improved functions and modernization
• Elimination of health/safety hazards
• Changes for aesthetic appeal
• Plumbing, heating air conditioning, and electrical upgrades
• Well and/or septic repairs
• Roofing, gutters and downspouts
• Flooring, tiling and carpeting
• Energy conservation improvements
• Major landscape work and site improvement
• Access for the disabled

Home Inspection:
The cost of your construction is estimated by an FHA Approved 203(k) consultant (estimator). The cost consultant assists you in determining the scope of repairs and the costs budgeted for the renovation job.

• Perform a home inspection to create preliminary costs estimates based upon FHA minimum property standards plus the scope of work as defined by the home owner/buyer.
• Once project has been determined, the cost consultant prepares a "work-write up" and 3 contractor bid packages are issued to the home owner/buyer.

Appraisal:
The appraiser will be given a copy of your "work-write up" to estimate an after improved value for your new or current home. We loan against that improved value thus allowing you to finance the cost of repairs.

Other Eligible Costs:
(THESE COSTS MAY BE FINANCED INTO THE MORTGAGE LOAN)

• Contingency reserve (10-15%)
• Up to 6 months PITI mortgage payments
• Permit costs
• Consultant fees
• Inspection and title update fees
• Architectural & Engineering fees (if needed)

Here are a few suggestions to get you started:

• Get pre-approved using our online application with true 203(k) experts
• Locate a home and submit a contract
• Once the contract is accepted, contact us for the names of FHA approved consultants to get you started