Mortgage Banking – FHA Loans

Most home buyers will need bank financing. What’s involved, what options are there? Who should you approach. We want to help by outlining the most common Real Estate financing methods.

VA, FHA, USDA, Conventional Loans — what are the advantages, disadvantages, and circumstances where a given option is most appropriate? How does it all work?

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The Context

Real Estate Brokers are frequently asked by buyers (and sellers!) how Banking and Mortgages work. Not only do the particulars affect the value of property buyers can afford, Loan approval and funding at closing frequently govern purchase agreement contract timelines.

Why do we need to know this stuff? Well, interest rates reflect the market and how much loans cost.

Oregon Bay Properties / SOCoastHomes.com normally suggests a minimum of 45 days for the length of Escrow required when FHA Loan..

Getting all of the moving pieces properly configured is an administrative skill acquired through years of Banking experience. Finding a great Loan Officer can make a transaction possible that otherwise might not be feasible.

How it works.

Ginnie Mae LogoFHA loans are also insured by Freddie Mac and Fannie Mae. But FHA loans can also be insured by Ginnie Mae which only insures FHA and VA loans. Ginnie Mae is a 100% Government agency (Fannie and Freddie are mixed Public and Private operations.)

Something many don’t know is that FHA loans secured by Freddie/Fannie/Ginni can be obtained to finance multi-residential property: duplexes, up to four-plexes are eligible.

FHA loans have been helping people become homeowners since 1934. The Federal Housing Administration (FHA) – which is part of HUD – insures the loan, so your lender can offer you a better deal.

HUD (Housing and Urban Development) has anti-discrimination rules and these are written into loans insured by Fannie/Freddie/Ginnie. Here is where you can file a complaint.

fair housingFair Housing And Equal Opportunity:

FHEO protects people from discrimination on the basis of race, color, religion, sex, national origin, disability, and familial status. In addition, housing providers that receive HUD funding, have loans insured by the Federal Housing Administration (FHA), as well as lenders insured by FHA, may be subject to HUD program regulations intended to ensure equal access of LGBT persons.

FHA programs are designed to help first-time buyers – primarily. Some of the objectives are:

Low down payments
Low closing costs
Easy credit qualifying

loan officer 2Credit Score:

620 is minimum. However, there are variations depending on cash down payment, property type, and occupancy.

Credit History:

3 years after a foreclosure, 2 years after a short sale. (Much less than Conventional Loans)

Debt to Income Ratios:

Approvals happen with “above normal” ratios. Lenders have more latitude given individual circumstances

Down Payment Minimums:

3.5 % for Owner Occupied Single Family. Which may be 100% obtained as a gift.

Structures:

Site/Stick-built homes

Manufactured Homes – Double Wide built after June of 1976.

Condos – Must be HUD approved projects.

Financial help for seniors:

Are you 62 or older? Do you live in your home? Do you own it outright or have a low loan balance? If you can answer “yes” to all of these questions, then the FHA Reverse Mortgage might be right for you. It lets you convert a portion of your equity into cash.

Summary:

These are just some of the conditions that FHA Loan borrowers need to meet. There are many others. An excellent employment history may be required, for instance. Ask your Banker for details.

We are citing information provided by Sheree Busby at Stearns Bank.

Click here to view the complete document: FHA Loan PDF.

Sheree says “FHA offers the most flexibility for borrowers with credit scores of less than 620.”

We’ll discuss VA Loans next time.

SOCoastHomes.com:

If you’re contemplating Beach Town property in or around Bandon, we’d love to talk to you. Contact us anytime!

Our Second installment of this series:

We’re producing a series of blog posts on Banking that will outline a range of loan products: Conventional, FHA, VA, USDA and a couple of others that provide ‘rehabilitation’ financing for distressed properties. These outlines are not Banking advice. Call your Banker for actual details.

View the first installment of our “Banking” series at this link.

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