FHA Home Loan Folsom, CA
Tailored FHA Home Loan Programs from Iron Point Mortgage
What is an FHA Loan?
An FHA is a mortgage loan insured by the Federal Housing Authority. While it is like any other loan, when underwritten to meet official FHA loan guidelines, it can be insured with the full backing of the US Government. As a result, the lender is able to provide interest rates that are often lower than conventional loans, whose bonds are not fully backed. FHA guidelines provide for less stringent underwriting as well. In the case that a borrower defaults and the lender has to take the property back FHA Insurance will make the lender whole.
Who Is the FHA Loan For? FHA Loans provide new homeowners, re-entering homeowners and those with less than perfect credit an opportunity to purchase a home or refinance. Whether you are a first time buyer with limited credit history or re-entering the market after a bankruptcy or foreclosure, an FHA Loan is a great place to start.
Highlights of the FHA Loan:
FHA Home Loan eBook: FHA Home Loan eBook
- Low Down Payment: 3.5% of purchase price
- Flexible Guidelines: Insured by FHA
- Lower Rates – Often less than Conventional 30-Year Fixed
- Mortgage Insurance – Up-Front and Annual paid monthly
- Purpose: Purchase, Refinance, Cash Out
- Co-Signor: A non-occupying co-borrower can help qualify
- Gift Funds: 100% of down-payment can be gifted from family
- Who is Eligible? All qualified applicants without current FHA
- Income Limitations: None
- Reserve Requirements: None
- Credit Required: Most banks require at least a 580 Fico Score
- Foreclosure Seasoning: 3 years
- Short Sale Seasoning: 3 years
- Bankruptcy Seasoning: 2 years Chapter 7 and 1 Year 13
Benefits of using an FHA Loan: FHA has many positive points, but the most obvious are the ability for a borrower to purchase a home for 3.5% down payment, qualify through relaxed guidelines, and obtain interest rates that are often lower than conventional 30-Year Fixed Mortgages.
Why Are FHA’s Rates Lower? FHA Insured Loans are tied to Ginnie Mae Bonds which are the only mortgage bonds that have the full backing of the federal government. These bonds are considered risk-less and therefore are priced accordingly. This allows lenders to provide lower rates on FHA Loans.
What Can FHA Loans Be Used For? Both purchases and refinances including cash-out. A unique feature of the FHA Loan is the Streamline Refinance where no appraisal and very little paperwork is required:
- Purchase – You may use an FHA Loan to purchase a single family residence, 2-4 unit, condominiums on the FHA Approved Condo List, manufactured, or PUD that you intend to owner-occupy (live in). Investment properties are not eligible with an FHA Loan.
- Refinance – This may be from another type of loan to an FHA Loan or from an FHA Loan to an FHA Loan. You may pay off high-interest debt or take cash out for other purposes including home improvement or sending kids to college as long as you qualify and there is enough equity in the property.
- Streamline Refinance – For existing FHA Loans, when rates go down, FHA permits a Streamline Refinance. Typically no appraisal, income or assets are required.
What Is FHA Mortgage Insurance? While FHA Loans require only 3.5% down payment, less risk to the borrower, they do provide more risk to the lender. As a result, FHA Loans require mortgage insurance, an insurance policy paid for by the borrower, which insures the lender in case of a default on the mortgage. If a borrower is putting less than 10% down on the property, the mortgage insurance is required over the life of the loan. If putting 10% or more down, mortgage insurance is required for at least 11 years.
What Mortgage Insurance Is Required On An FHA Loan? Each FHA Loan requires the two forms of mortgage insurance. Up-Front Mortgage Insurance which a one-time percentage of the mortgage charged up front and added to the balance of the loan. It may be paid out of pocket but generally is not. See the chart below to determine what your Up-Front Mortgage Insurance may look like. In addition to the Up-Front Mortgage Insurance, Annual Mortgage is required. This is percentage of the loan spread over the year and paid monthly as part of the mortgage payment. See the chart below to determine what your monthly Mortgage Insurance may look like.
|Loans Amounts < = $625,500:||Loan Amounts > $625,500:|
|Up-Front Mortgage Insurance:||Up-Front Mortgage Insurance:|
|Streamline Refinances:||1.75%||Streamline Refinances:||1.75%|
|Annual Mortgage Insurance:||Annual Mortgage Insurance:|
|Loan Terms > 15 Years||Loan Terms > 15 Years|
|LTV > 95%||0.85%||LTV > 95%||1.05%|
|LTV <= 95%||0.80%||LTV <= 95%||1.00%|
|Loan Terms <= 15 Years||Loan Terms <= 15 Years|
|LTV > 90%||0.70%||LTV > 90%||0.95%|
|LTV 78.01% – 90%||0.45%||LTV 78.01% – 90%||0.70%|
|LTV <= 90%||0.45%||LTV <= 90%||0.45%|
Who Can Use an FHA Loan? As long as a borrower is not already using an FHA Loan, anyone that qualifies is eligible for their primary residence. There are some exceptions when a 2nd FHA Loan may be used, but it is usually when a person has been relocated and has not been able to pay off their existing FHA.
History of FHA: FHA Loans were created in 1934, during the Great Depression, to help banks provide loans to would-be home-buyers with very little down payment. Prior to that time, home-buyers had to typically come up with as much as 50% down payment and pay the loan off in as little as 5 years. During the Depression, many banks lost their appetites to lend, and the government was eager to get the economy moving again.
Does the Government Provide the Loan? No they do not. Many borrowers think that the government provides the loan directly, but that is not true. Federal Housing Authority insures FHA Loans that are offered by qualified participating lenders.
How Does an FHA Loan Work? All normal qualifying criteria are used including income, asset, and credit qualification. Once the loan is originated, FHA insures the lender against loss should the borrower default.
What Are Lender Overlays? In addition to FHA’s rules or guidelines, lenders follow their own set of guidelines called overlays. These are additional restrictions imposed by the bank due to the fact that these are typically higher risk loans and borrowers.
What is a Case Number? An FHA Case Number is a tracking number that is issued to a property when a borrower initiates a loan. The case number stays with the property for six months and must be released if the borrower cancels and another borrower wishes to use an FHA Loan to purchase the property.
Who Can Be On The Loan? There are very few restrictions regarding who may be on the loan: Unmarried Borrower Alone, Married Borrower and Spouse, Married Borrower Alone (if a spouse is not going to be on the loan, their monthly debt commitment will still be calculated into the qualifying ratio even though their income will not be used), Un-Married Borrowers Together, and Borrower(s) and a Co-Signor.
How Many Borrowers Can Be on an FHA Loan: FHA does not specify how many borrowers can be on an FHA Loan, but each lender will have their own rules. It is common to cap the number of borrowers at four.
How to Get Started:
To start the loan process, it is pretty simple. Fill out an application on-line at http://ironpointmortgage.com/apply-here/ or call us at (916) 985-3200 for an application over the phone.