Loan Processor and Realtor Liaison
FHA loans have been helping people become homeowners since 1934.
FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase
price, and most of your closing costs and fees can be included in the loan. Available on 1-4
FHA has a loan that allows you to buy a home, fix it up, and include all the costs in one
loan. Or, if you own a home that you want to re-model or repair, you can refinance what you
owe and add the cost of repairs - all in one loan.
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.
You can include the costs of energy improvements into an FHA Energy-Efficient Mortgage.
Yes, FHA has financing for mobile homes and factory-built housing. There are two loan
products – one for those who own the land that the home is on and another for mobile homes
that are - or will be - located in mobile home parks.
The Federal Housing Administration (FHA) - which is part of HUD - insures the loan, so your
lender can offer you a better deal.
FHA allows a buyer to purchase a home with as little as 3.5% down. They tend to be more
lenient on areas such as credit, funds to close and co-borrowers.
Most loans use a method of analyzing credit called credit scoring in the underwriting
process. Studies have demonstrated a direct relationship between low credit scores and
higher mortgage delinquency rates. As a result many lenders have established minimum credit
scores at which they will accept loans. Unfortunately, a lack of credit, old delinquencies
or incorrect information on the credit report can cause a low credit score. FHA does not
have specific credit score requirements. Although a high credit score may assist in getting
the mortgage approved, a low score is not automatically cause for denial. If the credit
scores are low, then it is up to the borrower to demonstrate his/her ability and willingness
to pay the loan back. This allows the borrower to explain the circumstances surrounding the
credit difficulties and have that explanation considered in the underwriting process.
The underwriter on an FHA loan will review the credit and payment history of a customer
concentrating on the most recent 12 to 24 months. If the customer has had a good payment
record over the past 12 to 24 months they can often get approved for a mortgage even when
Conventional financing has turned them down. An experienced loan officer can help the
customer clearly tell their story and will often make suggestions as to how to make the file
more acceptable to FHA. Because of FHA's leniency, some borrowers with past credit problems
elect to use FHA for loans when they have a substantial down payment rather than getting a
higher interest rate conventional loan. FHA tends to be more flexible than Conventional
financing in the money needed to purchase the home.
In an FHA mortgage the customer must put at least 3.5% of the sales price into the
transaction. Some of this money may be used for down payment and the rest for closing costs
. Keep in mind, however,that the total cost to close on an FHA is commonly over the 3.5%.
With the down payment, closing costs, money to establish escrows for taxes and insurance
plus interest to finish out the month of closing, the total costs can be closer to 6 or 8%
of the sales price.
The interest rate that you select will also have a bearing on the total costs. If you select
a lower rate so that you can reduce your payment, you may end up paying additional money
towards "points". At the same time if you are comfortable with a slightly higher
payment you may find a lender that is willing to reduce the costs to close in favor of a
higher interest rate.
FHA allows the borrower to get the funds necessary to close from several sources. They
include such areas as personal savings, gifts, grants, loans from retirement accounts and