Just imagine lounging in an easy chair in a home of your own. If you are unsure about getting a mortgage, than a FHA loan may be the way to go. Here are a part of my notes regarding FHA Loans.
Purpose
Makes residential mortgage loans more accessible to home buyers
Designed to help buyers who:
Have good credit
May have difficulty obtaining cash for down payment and/or closing cost
Advantages of an FHA Loan
Reduces the down payment
Borrower can finance up to 96.5% of the purchase price (or appraised value, whichever is lesser)
FHA mortgage insurance is cheaper than private mortgage insurance on a conventional conforming loan.
The upfront premium (cost) can be financed as part of the loan
Continuing monthly premium payments
Included in your loan
Paid over a 5-year period
Or paid until loan balance reaches 78%
Buyer can receive closing cost assistance from:
Seller
Gifts from 3rd parties
(conventional conforming loans don’t allow this type of assistance)
Other Things You should know about FHA Loans
An Appraisal is required for FHA Loans
The home you choose has to meet minimum property standards
Home needs to be “safe and habitable” in order to qualify for FHA financing.
Properties that need to be rehabbed will not qualify.
ALL peeling paint must be scraped, sanded and painted on all buildings on the property.
Buyer has to pay Mortgage Insurance Premium (MIP)
What is MIP?
MIP is a form of insurance that that protects lenders in case of default. The FHA provides mortgage insurance at a cost that is lower than that charged to borrowers for private mortgage insurance. By having this cheaper insurance, lenders can offer loans to more people who may not qualify using other mortgage methods.
Upfront premium – This amount is paid when you get the loan. This upfront amount is can be financed and included in your loan.
Monthly premium – This cost will be included in your loan payment and last for five years or until the loan balance reaches 78%
Eligibility Requirements
Housing Expense to Gross Income Ratio should not exceed 31%
Recurring Debt to Gross Income Ratio should not exceed 43%
If you need help determining if you are eligible feel free to contact me.
Source
NC Real Estate Manual, (August 2017)
If you need to buy or sell a home, I'll help you Move On!
JJ Brannon is an real estate agent at Weichert Realtors Triad Associates.