FHA LOANS
OPENING THE DOORS TO HOMEOWNERSHIP
FHA mortgage loans are home loans that are insured by the U.S. Government’s Federal Housing Administration (FHA). An FHA mortgage is an important option to consider when looking for the home of your dreams, especially for first-time homebuyers or buyers with low to moderate incomes.
FHA LOAN HIGHLIGHTS
FHA loans are widely used by first-time homebuyers and people with low-to-moderate incomes since this government-insured mortgage features:
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Low down payment requirements
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Flexible income and credit requirements
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Fixed- and adjustable-rate loan options
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Offering loans for 1- to 4-unit properties and condos in some cases
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Allowing gift funds from a relative or employer*to be used for down payment
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Allowing home sellers to contribute up to 6% of applicant’s closing costs
*Subject to underwriting review and approval.
FHA LOAN PROGRAMS
ADJUSTABLE-RATE MORTGAGE
Adjustable-rate mortgage loans are available through an FHA mortgage loan. An adjustable-rate mortgage loan, or ARM, is a home loan that starts with a lower fixed interest “teaser” rate for a period of five to 10 years, followed by periodic rate adjustments based on current market mortgage rates. Adjustable-rate mortgage loans may be the right mortgage loan option for borrowers interested in a lower introductory interest rate and greater flexibility if the borrower thinks they may only stay in the home they are buying for a few years, instead of for the entire life of the mortgage loan.
STREAMLINE REFINANCE
Streamline refinance refers to the refinance of an existing FHA mortgage, requiring limited borrower credit documentation and underwriting, because all that has previously been initially taken care of during the original FHA home purchase transaction. Basic requirements of a streamline refinance include (1) the mortgage to be refinanced must already be FHA insured and must be current, (2) cash in excess of $500 cannot be taken out as a result of the streamline refinance transaction and (3) the refinance must result in a net tangible benefit to the borrower.
FIXED-RATE MORTGAGE
Fixed-rate mortgage loans are also available through an FHA mortgage. The stability and predictability of a fixed-rate mortgage loan are the biggest advantages associated with these mortgage loans. You will know exactly how much interest you will pay over the life of the mortgage loan even before you sign all your documents. The total monthly payment of principal and interest remains fixed over the life of the loan, and in the early years in the life of your mortgage loan, most of your payments will go toward that interest. As you pay off more and more of your fixed-rate mortgage loan over the years, the amount paid monthly toward loan principal will increase, and the amount paid monthly toward interest will decrease.