Finding a FHA Mortgage loan

Loans are government-backed mortgages for single-family and multifamily homes.

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A FHA loan can be a viable path to homeownership for many types of buyers.

FHA VS COnventional Loans

Mortgage Insurance

FHA mortgage insurance varies from 0.45% to 1.05% of the loan amount.

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Loan Limits in 2020

FHA loan limits vary by location, the limit in low-cost counties is $331,760.

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Down Payment

The minimum FHA loan down payment is 3.5% if your credit score is at least 580.

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Credit Score Requirement

A credit score for an FHA loan must be at least 500 to qualify for the lowest down.

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Start with your zip code to compare section 245(a) FHA mortgage options

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Very helpful fully explaining the different plans. Cash value is accessed via policy loans, which accrue interest and reduce cash value our valuable items.

Maria Marlin Retired Govt Officer, ON, Canada
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Very helpful fully explaining the different plans. Cash value is accessed via policy loans, which accrue interest and reduce cash value our valuable items.

Maria Marlin Retired Govt Officer, ON, Canada

Fixed-rate mortgages are the most common type of FHA loan. Like other fixed-rate mortgages, the interest rate will not change over the life of the loan. This can be helpful as borrowers will always know how much their mortgage payment will be every month.

With an adjustable-rate mortgage (ARM), your interest rate and monthly payment may be lower than a fixed-rate mortgage, at least at first. However, your payment can increase or decrease over the life the loan.

Most adjustable-rate mortgages have an initial period with the interest rate is fixed, after which it can change at regular intervals. Changes in your interest rate, and subsequently in your monthly payment, can occur as often as once or twice per year.

Adjustable-rate mortgages may allow people to buy more expensive homes when the interest rate is initially low; however, it’s important to keep in mind that the interest rate, and subsequently the monthly payment, may increase. These types of loans may still be attractive to borrowers who move frequently, such as during the time when the interest rate is still fixed.

The reverse loan offered by the FHA is called a Home Equity Conversion Mortgage (HECM). These are only available to borrowers ages 62 and older who have equity in their homes. They must also still live in the home and the loan is used to supplement their income.

Like most reverse mortgages, you must be able to keep the home in good repair and pay property tax and insurance payments. The principal and interest are due when the home is sold, or when the borrower dies.

Funds can be received in the following formats:

  • Equal monthly payments for the rest of your life
  • Equal monthly payment for an agreed period
  • A line of credit, though there are caps on the size of some lump-sum withdrawals

Graduated Payment Mortgage or Growing Equity Mortgage

Section 245(a) of the National Housing Act assists homebuyers who expect their current incomes to rise. The FHA Graduated Payment Mortgage (GPM) was created with lower initial monthly payments for these borrowers. Later, the payments gradually increase.

GPM loans are only available on single-family residences which are to be used as the primary borrower residence.

Five plans are available, which have varying lengths and rate of payment increases. Some include a higher down payment as well.

Tired of overpaying on utility bills? The FHA’s Energy Efficient Mortgage program (EEM) can help you save money on your utilities by financing energy-efficient home improvements. EEM assumes that if you’re spending less on utility bills, you’ll have more to spend on your home mortgage for a higher-priced home.

In order to qualify, improvements must be deemed cost-effective, when the cost of making them is equal to or less than the money saved on energy bills from the improvements.

There is no maximum dollar amount that can be financed, however, the lesser of the following options can be added to a borrower’s regular FHA loan:

  • Cost-effective improvements based on a home-energy assessment
  • The lessor of 5% of:
    • The adjusted value
    • 115% of the media area price for a single-family home
    • 150% of the national conforming mortgage limit

An FHA lender can help determine the dollar amount for your individual situation. Some complementary energy-related programs also exist and they may have separate limits.

You can qualify for an EEM if your improvements are cost-effective, even if you’re income isn’t high enough to qualify you for the additional funds. You only have to qualify for the initial FHA mortgage. You also don’t have to put down any additional funds on the cost of the loan (remember, the 3.5% down payment for the FHA loan is still required).

Some examples of EEM approved improvements may be energy-saving equipment, or solar and wind technologies. The funds can be used to pay for materials, labor, inspections and the home energy assessment.

Funds can be used for the purchase or refinance of a manufactured home and/or lot. However, you are not required to own the land on which the home is sitting. If you lease the land, a lease term of three years is required to qualify for an FHA loan.

The maximum loan amounts are lower than with other types of FHA loans. The maximum loan amount for the home only is $69,678. If you are getting a loan again the home and lot, the maximum loan amount is $92,904.

It’s also possible to get a loan just for the lot. The maximum loan amount is $23,226.

Terms on a mobile home loan are also shorter than traditional mortgages. Terms for a mobile or manufactured home can be up to 20 years. A 15-year term is the maximum for manufactured home lot loans.

Condominium loans are sometimes called Section 203(b) loans. To qualify for a FHA loan, condos must be located in an FHA-approved condominium project that is primarily residential. It must contain at least two units.

Many different types of dwellings can qualify, including:

  • Detached
  • Semi-detached
  • Row houses
  • Walk-ups
  • Mid-rises
  • High-rises
  • Manufactured housing

Loan terms can be up to 30 years for single-unit loans.

The 203(k) mortgage program allows homebuyers and homeowners to finance up to $35,000 into their mortgage for repairs, improvements or upgrades to their home.

This allows homeowners to quickly tap into cash to pay for repairs and upgrades, including those that may be identified by a home inspector or FHA appraiser.

Some repairs or upgrades that homeowners may make could be to prepare their property for sale. Others may choose to make their home move-in ready by remodeling the kitchen, painting the interior or buying new flooring.

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