Download - Fha Basics
How FHA Helps REALTORS® Sell More Homes
FHA’s Mission: Insure Mortgages
Help consumers purchase and improve homes
Give lenders confidence that loans will be repaid
Why Use FHA?
Good terms because lenders are protected from risk
Many products for buying, renovating, and refinancing
FHA-approved lenders everywhere
Who Benefits Most?
First-time home buyers and others who need cash down as low as 3.5 percent
Borrowers seeking low monthly payments
Those who need help qualifying because their credit is less than perfect
Not the Same Old FHA
Simpler process for lenders
More flexible rules for appraisals and closing costs
Loss mitigation to avoid foreclosure
The New FHA
TOTAL Scorecard credit score system: quick, fair
Loan-to-value ratio comparable with other prime products
Premiums: Up front cannot exceed 3.0 percent, 2.75 percent for first-time homebuyers who participate in counseling. Plus 0.5 percent annually
Appraisal Changes
FHA guidelines are the same as for conventional loans
No need to repair cosmetic defects or normal wear and tear
Focus on valuation of the property
No List of Allowable and Not Allowable Closing Costs
Borrowers permitted to pay virtually all closing costs
RESPA still applies
Qualifying Borrowers without Traditional Credit Histories
Many lack traditional credit scores
FHA permits lenders to accept non traditional histories, such as a report from Payment Reporting Builds Credit®
What This Means for You and Your Clients
Better pricing
Easier access to credit
Lower down payments
HUD relaxes flipping rule
Home Purchase
One- to four-family homes (Section 203b)
Condominium units
Manufactured (mobile) homes, including lots
Homes needing rehabilitation
One- to Four-Family Homes (Section 203b)
New or existing homes
Loan limits vary based on geographic area
96.5 percent financing possible
Finance upfront insurance premium within the mortgage
Adjustable Rate Mortgages for Purchase or Refinance
Keep initial rates and mortgage payments low
Easier to sell affordable homes even when mortgage rates are high
Maximum change over loan lifetime: 5 percentage points
Condominium Units
Low and moderate income renters stay after conversion
Condo must serve as buyer’s principal residence
Loan insured up to 30 years
Manufactured (Mobile) Homes
New or used
5 percent down payment
Lender insured to 90 percent of home value, maximum $48,600
Manufactured Home Lot and Combination Insurance
Lender insured to 90 percent of loan value
Up to $64,800 for manufactured home and lot and $16,200 for lot
Homes Needing Rehabilitation
Buy or rehabilitate homes
Property valuation: Pre-rehabilitation plus rehab cost or 100 percent of appraised value after rehabilitation
Low insurance premium
Rehabilitation Mortgage Insurance — 203(k) Program
A single mortgage buys a home requiring $5,000+ for rehabilitation
Or rehabilitate an existing home
Borrowers save time and money with a loan insured even before the property is offered as security
Streamlined 203(k) Limited Repair Program
For single-family properties sold by HUD or to refinance an existing mortgage
Make improvements up to $35,000 and get a mortgage based on after-rehab value
Energy Efficient Mortgages (EEM) Program
New homebuyers or homeowners can finance energy-efficient features
No separate loan required
Up to 5 percent of property value
Property Improvement Loan Insurance
Light or moderate rehabilitation of property or construction of nonresidential buildings
Insured up to 90 percent
Up to $25,000 for a single-family home or up to $60,000 for multi-family property
Housing Programsfor Special Groups
Essential public employees
Indian reservations and other restricted lands
Reverse mortgages for homeowners age 62 or older
Designated disaster areas
“Good Neighbor Next Door” Program
Essential public servants can get up to 50 percent discount off list price
Commit to 36 months as sole residence
Indian Reservations and Other Restricted Lands
Tribe must participate
FHA follows tribal policies for land lease
Borrowers must be able to meet FHA credit qualifications
Homeowners 62 or Older
Reverse mortgage/Home Equity Conversion Mortgage
Withdraw home equity as cash payments
Use cash for any purpose
Single Family Mortgage Insurance for Disaster Victims
100 percent financing
Current mortgage limits range from $172,632 to over $300,000
Education and Counseling
HUD offers Housing Counseling Assistance Program
Any renter, owner, or potential homeowner can learn how to make rent or mortgage payments
FHA Refinance Program
Raises loan to value (LTV) for “cash out refinances”
95 percent (85 percent for properties above $417,000)
One year’s worth of timely mortgage payments required
Protection Against Foreclosure
Loss Mitigation program authorizes lenders to assist borrowers in default
“Special Forbearance” offers temporary reduction or suspension of payments
Choose the Right FHA-Approved Lender
Refer clients only to lenders in whom you feel confident
They must understand FHA rules
Rules change, and your client doesn’t want surprises