FHA Loan Products in Limbo
FHA still only offers home financing that only requires 3% down-payments. Clearly, Low down-payments and low rates make FHA enticing to first time homebuyers! Limited or Poor Credit? No Equity…No Problem! You can find advertisements that feature FHA home loans and you can’t help but wonder, is FHA going to replace sub-prime? If non-prime and Alt-A borrowers have no avenues for home loans, many experts believ these types of borrowers will to try to qualify with FHA loans. Now, they’re have been some changes to help avoid this route, but the key difference between FHA and subprime mortgages falls back on the simple issue of income qualifications.
At this point, if you are an applicant considering home-buying, FHA is clearly your best bet to finance a home with a low mortgage rate. FHA was never intended to offer an alternative to shady loan applicants. FHA has always required complete income qualifications, whereas most sub-prime lenders offer “stated income” loan programs that could entice applicants who can’t actually afford the mortgage loan as advertised.
FHA mortgage lending continues to offer incentives such as reduced down payments and limited credit availability, but it also stresses the fact that homeownership is for people who can afford to make their mortgage payment each month. FHA recently eliminated down payment assistance loans. Rumor has it that FHA is even considering lowering the cash out refinancing requirements from 95% to 85% loan-to-value ratios.
FHA Mortgage Benefits
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FHA insures home mortgage loans that enable low and middle income borrowers to finance or refinance homes in America. FHA loans provide government assistance so Americans can purchase properties and become homeowners. Typically FHA home mortgages provide low rate, reduced lending costs and only 3% is required for the down-payment in most cases.
FHA offers mortgage insurance but they do not make home mortgages. However, the FHA home loan program often minimizes the cost of a home financing and there are no penalties for refinancing or early pay-off. In addition, FHA encourages lending companies to finance loans for borrowers with all types of credit. With FHA’s Section 203(b) program, a homebuyer can purchase a new or used 1-4 family home. FHA home-buyers must occupy the home.
A FHA mortgage enables borrowers with poor credit scores to qualify for the reduced rate loans, rather than taking the higher adjustable rate loan offered by sub-prime lenders. This can save thousands in interest charges. Required down payments are also smaller. Instead of the typical 10% down, a buyer can put down as little as 3%. The closing costs can also be financed with the mortgage, lowering the initial costs of purchasing a home.
FHA Mortgage Refinance Loans Improve Rates
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FHA refinance loans are a popular government mortgage that streamlines the home refinancing process for consumers. A refinance loan can be considered a useful finance tool that replaces an existing mortgage using the property as collateral to pay off the old mortgage. In most cases borrowers utilize FHA refinance loans for improving interest rates. Cash out refinancing is another popular type of loan that many homeowners use to obtain capital for home repairs, remodeling and debt consolidation.
FHA home loans are a cost-effective options for homeowners who are suffering with an adjustable rate mortgage that increased monthly payments often making owning a home too costly. FHA refinancing may be the most efficient method to avoid a foreclosure or escape a short sale.
Consumers also like FHA mortgages because they do not have FICO score requirements if your debt to income ratio and employment history meets government loan standards set forth by HUD. Many homeowners go through a period in their life when they make their loan payments late. FHA mortgage lenders may overlook the delinquencies if the borrower indicates that they have recovered and that the proposed loan offers benefits to the borrower. Because FHA mortgage loans do not require much equity, in most cases they are the best option for consolidating first and second mortgages into a one monthly payment. Continue article >
