January 10th, 2012
Written by Greg Frost Jr.
Categories: Economy, Federal Housing Administration, FHA, Mortgage News
The Federal Housing Administration provides mortgage insurance on loans made by FHA-approved lenders throughout the United States. The benefit for you is that the regulations are quite a bit easier to meet than standards set by the government-sponsored enterprises such as Fannie Mae and Freddie Mac. Because the FHA is a department of the government, the insurance is backed by the strength of the United States and its taxpayers.
FHA loans used to have some very difficult restrictions to overcome. There was a limit to the types of closing costs that could be charged and the property had to meet certain conditions before the borrower could take possession.
There still are appraisal issues that must be met regarding livability of the home. A working heater, no chipped paint and a working stove are a couple of the appraisal regulations that exist. I say appraisal because FHA-certified appraisers are mandated with looking at the property from a compliance standpoint. There are no longer onerous fee restrictions and for the last two years FHA has accommodated higher than usual loan amounts.
With all this accommodation the FHA loan for the purchase of a new home has become quite popular. Underwriting restrictions are minimal in comparison to Fannie Mae and Freddie Mac. An FHA loan can be written electronically or manually. The benefit is that a manual underwrite means a person is considering the information in the file. This allows for explanations regarding income or credit issues.
The FICO requirements are lower and the down-payment can be as low as 3.5 percent of the purchase price. When closing your loan the up-front premium is paid by you but financed in to the loan and the annual premium is paid monthly through your mortgage payment.
Written by
John Severino
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on Tuesday, January 10th, 2012 at 9:38 am and is filed under Economy, Federal Housing Administration, FHA, Mortgage News.
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