Mortgage Topics

In the last 12 months the credit crunch has tremendously affected conventional mortgage loans giving way to Federal Housing Administration (FHA) loans. Clients have been increasingly asking questions on how FHA loans can help them. Here are the 10 must know facts that will help you understand if this is the right option for you.

1. If you are purchasing a home, you are required to put a minimum of 3% down payment. However, starting January 1^st, 2008 you will be required to put down 3.5%.
2. You can refinance up to 95% of the value of your home.
3. Loan amounts are as follows:
      - High Cost Areas: $729,750 (the limit will be $625,500 starting January 1, 2009)
      - Other Areas: 125% of the area median home price (the limit will be 115% starting January 1, 2009)
4. Blemishes on credit scores are okay without your interest rates getting affected much. Your credit score can be as low as 580.
5. All down payment proceeds can be gift funds from parents, relatives or other source.
6. There are two types of mortgage insurance (MI) you are responsible for paying: upfront MI (at the time of purchase and included in your closing costs) which is 1.5% of the loan amount (it will go up to 1.75% starting October 1, 2008) and monthly MI (paid with your monthly mortgage payments) which is 0.5% of the loan amount paid in equal monthly installments (it will go up to 0.55% starting October 1, 2008). 
7. If you have filed for bankruptcy in the past, you will need to wait 2 years from discharge of Chapter 7 BK and 1 year for Chapter 13. If you have had a foreclosure in the past, you will need to wait for 3 years.
8. You will have to qualify with full documentation i.e., show your income, assets and employment details.
9. Property types include single family, 2-4 multi family as primary residence, town homes, condominiums (require HUD project approval). Investors can assume FHA loans on HUD REO properties.
10. Available FHA Programs include:
       - Fixed Rate Mortgages: 30 and 15 year
       - Adjustable Rate Mortgages: 1, 3, 5, 7 and 10 year (only fully amortized payment options)

We have not seen opportunities to purchase homes at these reduced prices in many years. I cannot underline the value of being qualified for a home mortgage in these times. An FHA loan might allow you to be in the driver’s seat to purchasing your dream home.