FHA LENDERS PROVIDE BORROWERS WITH MANY CHOICES
Why do we need an FHA Loan? No one likes to pay for living in a house and everyone dreams of having a place of their own. But it’s not as easy as it sounds and a great deal of difficulty lies in this process. Fortunately, after the advent of the Federal Housing Administration in 1934 the US government strived for making house ownership common among the citizens of US. Increased ownership and a stabilized housing system would boost the economy. The biggest risk in providing loans to lenders is to have assurance that whether the loan would be paid off according to the policies or not.
For this purpose, FHA developed its most highlighted feature of Mortgage Insurance Premium (MIP) Program which would produce a safe criteria to determine a lender`s ability to be a “good” or a “bad” loan.
What makes FHA Mortgages safe? Soon after the MIP program, the banks were given a big boost of confidence in terms of accepting potential lenders. This was due to the fact the MIP program provided the banks with the guidelines that would help them filter good loans which would have to pass the FHA`s minimum qualification criteria for a loan. These standards and qualification soon became to be known as the FHA Mortgage Guidelines. This system completely changed the way mortgages were handled before which were extremely tough and demanding for most of the US home buyers in the early 90s.
The guidelines insured that only potential lenders would enter into the circle who would be provided with attractive features like reduced downpayments requirements and also increasing the time period of the loan from 5 years to 15 and 30 years.
FHA Mortgage Guidelines: Considering and understanding the FHA mortgage guidelines would help loaners understand the criteria and what they can expect when they apply for an FHA mortgage loan.
Apply for FHA loans After Bankruptcy And Foreclosure: Facing bankruptcy and foreclosure would seem the end of your financial statement but with FHA you still have hope as per the guidelines of an FHA loan. Availing an FHA loan after bankruptcy, foreclosure, short sale and deed in lieu of foreclosure requires some minimum waiting period before qualifying for the loan. Following are the mandatory minimum waiting time periods for anyone facing the above problems when you apply for an FHA loan:
- After foreclosure there is a mandatory waiting period of 3 years.
- After the discharge date of bankruptcy there is a waiting period of 2 years.
- After a deed in lieu of foreclosure and shot sale there is a waiting time period of 3 years.
You must also be aware of the exact date of the waiting period from where it started and ends. Like for foreclosure the date for the waiting is the date that is reflected on the public records while the waiting date for a short sale starts from the sate reflected on the HUD-1 Settlement Statement date. The highlight of this guideline is that if you are someone who had to go through job termination due to a company shutdown because of which you had to go through foreclosure and bankruptcy then with the FHA Back to Work Extenuating Circumstances you are subjected to only one year waiting period before you avail the loan.
FHA loan with a bad credit history: There are many lending companies that wouldn’t allow you a loan if you had a bad history paying it off. But with FHA you need not worry about that because FHA doesn’t expect you to first pay off your old credits in order to avail a loan with them. If you are eligible via the minimum FHA guidelines then you don’t need to pay off any collections.
FHA loan with medical collections: Usually for an FHA loan it doesn’t matter if you have unpaid medical bills and you can still make it through the minimum qualifications. But the guidelines change if the unpaid amount exceeds $1000 in which FHA will now charge the 5% of the unpaid collections into your monthly debt obligations which will be then used to calculate your debt to income ratios. This can become a problem for those who have an enormous amount of unpaid medical expenses. One thing FHA does allow in this situation is that you can go into a written agreement over a mutually discussed amount which you can pay monthly then that will be counted as your monthly debt.
FHA loan with high debt to income ratio: Most FHA mortgage lenders have high expectations regarding debt to income ratio and they do not comply if it`s too high. People with high debt to income ratios can look towards FHA loans. FHA allows a maximum debt to income ratios for normal requests up to 45% while a 56.9% on their back end and a 46.9% DTI on their front end. FHA is a great choice for people with bad credit history and low incomes.
FHA loan co-borrower: FHA provides a wide variety and options of the kinds of loans you can request for. They have a great amount of concern for all kinds of people and especially with those having low income. FHA provides mortgage loans to those having low income who can have a non-occupant co-borrower to meet the qualifications. The co-borrowers can only be a person related to the mortgage applicant by blood, marriage or law and in special cases can be a close friend with friendship duration of over 5 years.
FHA gift funds: FHA is probably the only mortgage lender which allows 100% gift funds in the form of downpayments from parents, relatives, friends and charitable groups. A gift fund can be a percentage of the downpayment or the complete 3.5% downpayment offered to be paid by someone else known to the home buyer. The gift doesn’t need to be paid back to the person offering it.
Why choose FHA mortgage loans over others? We have gone through the terms and conditions required to avail an FHA loan but we should also highlight those facts which makes FHA stand out among all other mortgage lenders. Here are some generous advantages of FHA loans over other lenders:
FHA MIP Program: FHA Mortgage Insurance Premium program is the biggest advantage of choosing FHA as mortgage lender because it has the lowest rates among its competitors and the biggest advantage is that the mortgage term can range from 15 to 30 years.
FHA low downpayment: FHA has the lowest downapyment any mortgage lender can provide. Home buyers with FHA loan can pay downpayments as low as 3.5% which is ideal for buyers who don’t have enough saved for downpayments.
100% gift funds with FHA: FHA is very flexible with gifts and you can see only FHA providing this warm opportunity. FHA approves of gifts in the form of payments provided by parents, relative or a charitable group which can be a complete payment of your 3.5% downpayment.
No SSN with FHA: FHA doesn’t require your social security number as a mandatory parameter of providing you with a home loan. FHA is loan provider to all and that includes foreign ambassadors and even non-permanent residents.
FHA approved mortgage lenders: FHA is a giant network which means that you can get mortgage loans with the same benefits with FHA approved lenders and companies. It also means that once you clear the minimum requirements for an FHA mortgage loans, you can apply for any FHA affiliated or approved lender for a home loan.
Countless loan choices with FHA: FHA doesn’t follow rigid policies and it believes in the power of choosing. Flexible mortgage loan choices are one of the best things home buyers love about FHA. For example you can either go with a 30 year fixed mortgage plan and if you can`t then you can choose the 15 year plan. You can even get purchase and improvement loans from FHA once you have ownership of the house.
Property choices with FHA: FHA has a wide choice in the kind of property they can provide you for buying a house. FHA home buyers have the option of buying houses in all 50 states and in almost all kinds of neighborhoods.
Credit flexibility with FHA: FHA has the biggest heart regarding the credit status of many home buyers looking for home loans. FHA doesn’t expect perfection from home buyers and people with bad credit can have a chance of having a home of their own.
Constructions loans with FHA: With FHA you can apply for a 203k loan program which provides construction loans to homebuyers who want to upgrade or renew their houses. One can repair structural damages along with minor repairs as well.