FHA Home Loans. Federal Housing Administration (FHA) is under the US Department of Housing and Urban Development (HUD). FHA insured home loans are now one of the best choices for those who want to own a home. FHA home loans do not only require low down payment but also have relatively easy qualification standards.
As a government institution, FHA actually does not provide loans. FHA is only a facilitator of lenders approved in accordance with FHA loan guidelines. In other words, the FHA acts as a protector for lenders from losses in the case of default borrowers. By guaranteeing loans, the FHA provides federal assistance to buy homes for low and middle income people.
The FHA program was released in the 1930s as an effort to overcome the problem of Great Depression. The FHA also aims to stimulate the US economy and stabilize the housing market. Since then, FHA has provided housing loans to millions of low and middle income borrowers to buy or refinance their homes.
Why is it Popular Again?
Many residential consumers actually leave FHA loans when there is a housing boom. In fact, in 2007, according to a Federal Home Loan Center report, there were only around 3% of national housing consumers. Why do FHA housing loans become less attractive to consumers? Because the FHA provides loan limits, higher mortgage insurance costs, and stricter valuation guidelines.
At that time, conventional loan products only offered interest options. 100% financing options with low document alternatives. Because of conventional loan products, loan products offered by FHA are less attractive. However, at present, almost all loan products that previously competed with FHA loans are no longer available.
Conventional lenders now assume that previous products are too risky. Many people also accuse loan products, especially subprime products, as the root cause of the financial crisis, which is responsible for the damage to the world economic order.
Today the housing market and consumers have changed. Now, one of two loans from the United States is an FHA Loan!This success is inseparable from the efforts of the FHA to further facilitate the requirements for residential consumers. The FHA not only simplifies requirements but also offers lower down payment than conventional loans.
Other factors that make FHA loans more competitive because the value of real estate has decreased, but the FHA loan limit remains unchanged. Because of the above factors, there are currently many residential consumers who are eligible for FHA financing compared to before.
Types of House That You Can Buy
The next question is what type of property can I buy using an FHA home loan? FHA loans can be used to buy or refinance various types of houses. FHA loans can also be used to purchase rehabilitation properties. FHA allows you to borrow up to $ 50,000 to finance repairs after you own a home.
Another benefit of an FHA loan is that it can be assumed, which means if you are forced to sell your house later, the buyer can take over your loan. In the past, when interest rates continued to decline, many people were not interested in taking other people’s loans. But now the situation is different. Having a loan that can be assumed can actually be a distinct advantage.
How To Apply For An FHA Home Loan
The first step in applying for an FHA home loan is to contact an approved FHA lending partner. The Federal Home Loan Center is approved as a partner for all types of government loan products including loans guaranteed by FHA. One guaranteed loan product is a Certified Government Loan Specialist FHA loans are the easiest type of real estate loan because they only require a low down payment and do not require perfect credit.
FHA loans are not for investors or for vacation home purchases. To begin the process, you need to provide the following information to your Loan Specialist, as adapted from Federal Home Loan Center (www.fedhomeloan,org):
- Borrower Address(s) (past two years)
- Social Security Numbers
- Employment Info (past two years)
- Current Paystub(s) (most recent month)
- Banking Statement(s) (past three months)
- Federal W2’s (past two years)
- Federal Tax Returns, Income Statement and Business Balance Sheet
- Certificate of Eligibility ad DD-214 (veterans only)
What are the Criteria?
As an FHA loan requirement, you must be able to meet the following criteria:
- Must have a stable work history.
- Must have a valid Social Security number, a valid residence permit in the US, and be of legal age to sign a mortgage in your country.
- Must have a minimum minimum down payment of 3.5% to be applied to the purchase price (advances can be given by family members and closing costs can be paid by the seller, lender or lender from the lender up to 6% of the sale price).
- Mortgage payments (including PITI) must be less than 31% of your gross monthly income.
- Total monthly debt (mortgage, credit card, car, student loan, etc.) should not exceed 43% of your monthly income.
- Must be at least two years bankrupt, with good credit.
- Must be at least three years after confiscation, with good credit.
- The credit score must be 580 or more.