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FHA Home Loans
FHA home loans are mortgage loans that are insured against default by the Federal Housing Administration (FHA). FHA loans are available for single family and multifamily homes. These home loans allow banks to continuously issue loans without much risk or capital requirements. The FHA doesn't issue loans or set interest rates, it just guarantees against default.
FHA loans allow individuals who may not qualify for a conventional mortgage obtain a loan, especially first time home buyers. These loans offer low minimum down payments, reasonable credit expectations, and flexible income requirements.
What is a FHA Loan?
In 1934, the Federal Housing Administration (FHA) was established to improve housing standards and to provide an adequate home financing system with mortgage insurance. Now families that may have otherwise been excluded from the housing market could finally buy their dream home.
FHA does not make home loans, it insures a loan; should a homebuyer default, the lender is paid from the insurance fund.
Buy a house with as little as 3.5% down.
Ideal for the first-time homebuyers unable to make larger down payments.
The right mortgage solution for those who may not qualify for a conventional loan.
Down payment assistance programs can be added to a FHA Loan for additional down payment and/or closing cost savings.
FHA Streamline Refinance
An FHA Streamline simply means that you currently have an FHA loan and you want to refinance into a new FHA loan. This type of loan is mainly used for lowering your current interest rate. Although, the borrower is not able to take cash out for consolidating debt or home improvement. The benefits of a streamline refinance are reduced documentation requirements and potentially lower MIP. A client may qualify for reduced income and credit documentation, reduced appraisal requirements or both.
If an FHA streamline mortgage is for you, at Loan Pronto, the process is quite simple. Unlike your first mortgage, income verification is not required, and an appraisal is unnecessary. Additionally, we only need a copy of your driver’s license, current mortgage statement and your home owner’s insurance agent contact information. With that, you are on your way to an FHA Streamline mortgage loan!
FHA Versus Conventional Loans
The main difference between a FHA Loan and a Conventional Home Loan is that a FHA loan requires a lower down payment, and the credit qualifying criteria for a borrower is not as strict. This allows those without a credit history, or with minor credit problems to buy a home. FHA requires a reasonable explanation of any derogatory items, but will use common sense credit underwriting. Some borrowers, with extenuating circumstances surrounding bankruptcy discharged 3-years ago, can work around past credit problems. However, conventional financing relies heavily upon credit scoring, a rating given by a credit bureau such as Experian, Trans-Union or Equifax. If your score is below the minimum standard, you may not qualify.
Bankrupcty and FHA Loans
Yes, generally a bankruptcy won’t preclude a borrower from obtaining a FHA Loan. Ideally, a borrower should have re-established their credit with a minimum of two credit accounts such as a car loan, or credit card. Then wait two years since the discharge of a Chapter 7 bankruptcy, or have a minimum of one year of repayment for a Chapter 13 (the borrower must seek the permission of the courts). Also, the borrower should not have any credit issues like late payments, collections, or credit charge-offs since the bankruptcy. Special exceptions can be made if a borrower has suffered through extenuating circumstances like surviving a serious medical condition, and had to declare bankruptcy because the high medical bills couldn't be paid.
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