When people buy a house, they usually get mortgage, as it is more convenient to pay back rather than shelling out thousands and thousands of cash. Besides, mortgage helps you to use your money cleverly. Like the concept of investment, debt helps you use your instant cash for other financial opportunities because with debt, you get to make a purchase or avail of services without having to shell out the whole amount now. That’s why mortgage is a popular concept in home buying. Besides, in the absence mortgage, it would be impossible for people to afford buying a home.
However, mortgage may help you afford home buying but the overall cost of getting it may be sorely expensive. If you are not aware of the different kinds of mortgage and their rates, you may end getting a plan that is going to give you problems in the future.
Yes, it is indeed true. There are different kinds of mortgage in the industry and they have different terms and conditions. The rates are also lower for some, especially those that are government-backed.
One of the loans that you could enjoy is the FHA loans. FHA stands for Federal Housing Authority. It is a kind of loan created by the government in order to provide low financing cost to the American borrowers.
This kind of financing is highly appraised for not being strict in qualifying for credit. For you to see the difference of FHA loans from traditional loans here is a comparison:
1. Down payment. As to upfront down payment, the minimum for FHA loan is at 3.5%. As for the conventional loan, the minimum falls at 20% (after which you will be required to obtain private mortgage insurance). It can also be in a form gift fund.
2. With regard to closing cost, it is lower compared to conventional loans. FHA closing cost is highly regulated by the HUD; compared to conventional that could be go higher depending on the rates and services of the loan obtained.
3. The mortgage insurance is lower compared to traditional loans.
4. The reserve requirement is eliminated. There is no need to pay in advance the principal, interest, taxes and insurance upon closing.
5. If you decide to pay off your loans in advance, you won’t have to pay for penalties.
6. Underwriting is not so strict. It can be given to anyone just as long as they can afford the loan and just along as the house brought will be used as primary residence. They are more concerned with the borrower’s ability to repay rather than spending time investigating on credit worthiness.
7. FHA limits is identified using your monthly income, which are lower than the conventional loan. If amount you borrow exceeds the limit set, you will then have to shell out additional funds. On the other hand, you can take out another loan for the excess.
So take not of these things and weigh the advantages and disadvantages. Know that traditional loan isn’t just the only loan you can get. You can avail of the FHA loan as well just as long as you can afford it.
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FHA Loan FAQ:
Question: Is there any state where I can apply for an FHA loan when contracting?
We currently reside in AZ and our loan officer is telling us that we can’t apply for an FHA loan if we are contractors. I know you can apply for a loan in a different state from the one you reside at, are there any states where I can apply for an FHA loan when on 1099?
Answer: It’s more a matter of qualifying because you are independent contractors. It may be FHA guidelines and has nothing to do with the state you are working in. You may have to go another financing route, have you thought about Contract for Deed?
Question: Considering an FHA Loan through Chase Bank in San Diego. Any complaints about Chase?
My wife and I have been in contact with Chase Bank in San Diego regarding an FHA Loan as first time home buyers. We are a little hesitant going through Chase as we don’t know much about this bank. Would it be better to try and get a mortgage through a local San Diego Credit Union? My credit is excellent, no problems on the credit report.
Answer: I’d go with a smaller lender if you can. But not all lenders offer FHA loans. That’s the first question you’ll need to ask.
Question: FHA loan in 1998 – Seller purchased from builder with builder buy down. How much do they owe today?
A seller comes to you who purchased a home in August of 1998 with an FHA loan. The seller purchased the home from a builder with a builder buy down. The original loan amount was 77500. It was a 2 year 1 point per year buy down Starting at 6% on a 30 year loan. How much do they owe today?
Answer: If the interest rate were 5% in 1998 and 1999 and then jumping to 6% thereafter with the payments adjusting the answer would be $64,147. However if the interest rate were 6% in 1998 and 1999 and increasing to 7% thereafter the answer would be $65,859. However you should check with the lender to be sure.
Question: How soon can I refinance a new FHA loan?
I’m in the process of buying my first home, and the bank won’t finance it using a conventional loan. How soon can I refinance to get rid of the mortgage insurance and switch over to a conventional loan? I think I’ve heard an owner has to carry MI for 5 years? Is this true? Do I have to wait 5 years to refinance?
Answer: They do have restrictions. Your deed will tell you or you can ask your agent. If you are unable to qualify for anything but FHA, you won’t qualify to refinance anytime soon. They use the same rules.
To get rid of mortgage insurance, you need at least 20% equity. Why not just pay that up front? If you refi with less than 20% equity, you still have PMI.
Question: What is the best way to get a low interest fha loan in ohio?
Would it be better to deal with mortgage broker or individual banks or would a realtor be a help?
Answer: The realtor is no help as they will send you to their lender of choice. The mortgage banker or broker can find the best rates.
Question: Is a gas-burning fireplace a reason NOT to get an FHA loan?
How about a regular fireplace?
Answer: No and No. But you will have to pay a chimney sweep to certify the fireplace is installed correctly and operating at 100%.
Question: Do I qualify for an FHA loan or FHA grant?
I’m married and wife has had her parents house under her name for the last 3.5 years. If I apply for an FHA loan just under my name, do I qualify? Or does the fact that my wife has the house under her name deny me. I have never been a home owner, never bankrupt, no foreclosures, and my credit score is around 640.
Answer: You can, BUT, since you are married, your wifes debts will count against you in regards to your income/debt ratio. If she makes good money on her job, both of you can apply for this loan and see if your ratios come out right, considering the other home is not FHA?
Question: If my husband is unemployed, but I have a steady job, can I still qualify for a FHA loan?
Answer: Sure, as long as your income and credit are OK. There is no rule that all adults in a household have to work.