Basic FHA Loan Info

     If you a home buyer, refinancing your home, buying a “fixer-upper”, or are an existing homeowner who wants to make their home more energy efficient, the FHA may be able to make it easier for you to achieve your goals. Although not actual money, support from these organizations can make it easier to be approved for and afford a home loan.
    Just as you can get a student loan that is ‘guaranteed’ by the government, you can also get a ‘guaranteed’ home loan via the FHA. A ‘guaranteed’ loan means that these organizations promise to pay off all or a portion of your home loan if you default on the balance. This means less risk for the lender and an easier approval for you. Besides being approved, there are several other benefits to having a FHA guaranteed loan.
    Note: Not everyone will qualify for FHA loan programs. First, inquire with your loan officer to determine if it is an available option for you.

• A smaller down payment. Usually you need to have a smaller down payment amount for an FHA loan. This is good news for applicants that would typically be required to put down much more by lenders (or be turned down). This is especially true for those that have little or less than perfect credit histories. Of course, based upon the current status of the financial system, these guidelines are constantly changing and it is currently not as easy as it once was to qualify for FHA loans.

• A more flexible income to housing costs ratio. With these loans, your housing costs can typically add up to a higher percentage of your total income than is usually allowed by lenders. This means that you will be able to borrow a little more money for a home than you would otherwise. However, keep in mind what was mentioned above. Guidelines are subject to change based upon the current status of the economy.

• A lower interest rate. Even if you can get approved for a home loan without backing from the FHA, you will likely receive a lower interest rate if you have a ‘guaranteed’ loan. This is due to the simple fact that the lender is taking less of a risk since the FHA has promised to pay back your loan if you don’t. A lender’s mortgage rate is typically calculated to factor in the amount of risk they are taking.

    As with all mortgage loans, Do NOT make assumptions. Ask your mortgage company detailed questions regarding anything you are unsure about. If they are unwilling or unable to answer your questions to your satisfaction, try another lender. Even with all the recent changes, there are still plenty of companies to choose from. Finally, consider visiting the best source of information, the US Department of Housing and Urban Development (HUD), which administers the program. Visit their section about FHA loans located at: http://www.hud.gov/buying/loans.cfm.