FHA LOAN - QUESTIONS & ANSWERS

What is the (FHA) Federal Housing Administration?

The Federal Housing Administration, generally known as "FHA", provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.

Why ask for an FHA Loan?

There are lots of reasons to ask your lender for an FHA loan instead of taking a conventional or an expensive and risky sub-prime mortgage loan. Why not take advantage of the many benefits and protections that only come with FHA:

Easier to Qualify - Because FHA insures your mortgage, lenders are more willing to give loans with lower qualifying requirements so its easier for you to qualify.

Less than Perfect Credit - The main advantage to a FHA home loan is that the credit criteria for the borrower are not as strict as Conventional Loans sold to Fannie Mae (FNMA) or Freddie Mac (FHLMC). Someone who may have had a few credit problems or no traditional credit should not have a problem obtaining FHA financing. Even if you have had credit problems, such as bankruptcy, it’s easier for you to qualify for an FHA loan.

Low Down Payment - We have a low 3.5% down payment, and that money can come from a family member or charitable organization or in some States a Grant. Other loans don't allow this. Finally, FHA loans may require less income to qualify as they will exceed the Conventional debt ratios of 28/36% as their standard is 29/41%.

Help You Keep Your Home – The FHA has been around since 1934 and will continue to be there to protect you when others walk away. Should you encounter hard-times after buying your home, the FHA has many options to help keep you in your home and avoid foreclosure.

Is FHA just for first time home buyers?

Many people make the mistake and assume that FHA loans are only available for first time home buyers.  This is not true.  FHA loans are available to anyone, whether your first or fifth home and can be used to purchase a home or refinance a home.  If refinancing a home the current loan DOES NOT have to be an FHA loan.

What are the FHA loan limits?
FHA loan limits are different depending on what area in the country.  The loan limits will be based on your state, city, and county. 

What determines the interest rate for a FHA loan?

The interest rate for any loan is determined by several factors. The rate you can get from a lender depends on how risky of an investment the lender thinks the loan is. The higher your income, the less debt you have, and a good credit history will help you get a lower rate.

Can FHA help me refinance my home if I am in forbearance?

Yes, it is possible that a FHA refinance could help if you are in forbearance. This is called special forbearance and is based on your own individual situation. Providing proof that you could make payments under a new plan could help you to stay in your home.

Once you get an FHA loan, is there a certain length of time you have to keep the house before you can re-sell it?

No, there is not a certain length of time that you must keep the house.

How long does one have to keep the FHA loan before selling or refinancing?

There is no set time limit. However, generally to refinance there will have to be a little bit of built up equity in the home in order to make refinance worth while.

If I have just started a new job and get paid in cash, what information can I give my loan officer as income verification?

The best thing is some sort of income verification letter from your employer. You will want the letter to include how much you make, how often you are paid, and how long you have been working at that job earning that amount of money.