Frequently Asked Questions (FAQ)
Can I get rid of my annual mortgage insurance once my loan reaches 80 percent of my value?
All FHA loans with case numbers released after June 3, 2013 have permanent mortgage insurance, regardless of any loan-to-value. However, given sufficient equity you can always refinance into another loan type that doesn’t require mortgage insurance.
How can I get an FHA streamline refinance?
The FHA streamline is perhaps the easiest loan there is. As long as you’re refinancing an existing FHA loan into another with a net tangible benefit, you may refinance with a streamline. The net tangible benefit means your new payment must be lower by 5.00 percent or more or you’re refinancing out of an adjustable to a fixed. The streamline requires no employment or income verification, no appraisal needed and no credit score minimums. Pulling cash out is not allowed, however.
How long does it take to get an approval?
Once the file is completely documented your loan can close within a few days. We will need time to allow for third parties to provide us with the documents we need as well as obtain all your information before it can go to underwriting. Most every loan is approved and closed within 30 days. Expedited approvals are also available when needed.
Can I use a co-borrower?
You certainly can! FHA loans allow for a non-occupied co-borrower to help you qualify if your current income needs a little “push.” FHA loans are unique in this nature allowing outside income from a qualified family member. Other loan programs require the borrower to qualify with their own income regardless of any contribution from others.
What about my past bankruptcy?
You may obtain an FHA mortgage as long as two years have passed since the discharge of a Chapter 7 or two years since the filing of a Chapter 13. It’s extremely important that credit payments after a bankruptcy never be more than 30 days past the due date. It’s difficult to be approved with additional negative credit after a bankruptcy. For those with an existing Chapter 13, you may be still be eligible with permission from your Trustee and documenting a timely Chapter 13 repayment plan.
What if my credit needs some help?
If you think your credit score is too low to qualify, don’t come to that conclusion on your own! Let us help you review your credit report and help correct any mistakes on the report and work with you to provide a plan that will get your scores where they need to be for an FHA loan. FHA guidelines are bit less stringent as it relates to credit scores compared to other loan programs. You can even qualify for an FHA loan with a bankruptcy in your past.
Does FHA set my interest rate?
No, FHA only insures the loan. We provide as competitive a rate as any based upon your credit score. Those with scores above 720 will have slightly better rates than those with a score of 620 for example. Interest rates change daily and often do and no rate is guaranteed until you request a rate lock.
How much are closing costs?
There are third party services needed in order to complete an FHA approval including appraisals, title insurance and escrow charges among others. Your upfront premium may be rolled into your loan and your annual premium made in monthly installments. There are also lender fees used to offset the costs of approving and processing the application. We will provide you with an estimate of potential closing costs at the very start. We can also show you ways to save or even eliminate the closing costs on your loan and the seller is also allowed to pay up to four percent of the sales price of the home toward your costs.
Does FHA make the loan?
No, FHA-approved lenders make the loan. We are an approved FHA lender and take your loan from application all the way to the closing table. FHA issues lending guidelines that lenders must follow in order to receive the FHA loan guarantee. Should the loan ever go into default and the lender used proper underwriting guidelines the lender will be reimbursed for the loss. The guarantee is funded with an upfront mortgage insurance policy and an annual one. The upfront policy may be rolled into your loan amount and the annual policy in monthly installments. If you think of the FHA as an insurance company and not a lender you can see how FHA is involved.
How much can I borrow?
There are two considerations here. First, FHA limits the amount of loan to insure on a county-by-county basis. These loan limits are based upon the median home price in the area where the property is located. You may buy a house that is higher than the limit but you’ll have to come in with the difference.
The other concerns debt-to-income ratios. Your debt ratio is your mortgage payment including monthly mortgage insurance, property taxes and hazard insurance. Any homeowner association fees are also included. This amount is then divided by your gross monthly income. The result should be no greater than 31. If your house payment is $1,500 and monthly income $5,000 then your debt ratio is $1,500 divided by $5,000 = .30, or 30. Another ratio is your total debt ratio which includes other monthly obligations such as credit card payments, student loans or auto loans for example. This ratio is limited to 43. Note, the housing ratio of 31 is flexible but the total housing ratio is less so.
Can a family member give me money for the down payment on an FHA Loan?
Yes! FHA permits a borrower to receive a gift from a family member to use towards their down payment requirement. Currently, the FHA Minimum Down Payment requirement is 3.5% of the final sales price. The gift funds must be documented according to FHA standards. This is typically a bank statement from the gift donor showing they have the funds in their account and a gift letter. The gift donor can wire the funds or provide a cashier’s check to the title company/closing attorney the day of closing on the borrower’s behalf.
Is there a cap on the total household income for an FHA Loan?
No! FHA Loans do not have any cap or limit on the amount of income you can earn. It’s the more, the merrier for this Home Loan!
How much is an FHA Appraisal?
FHA appraisals can range in cost based on area and property specifics. The standard FHA 1004 Full Appraisal Report typically cost around $500. This cost is paid for upfront by the borrower to an appraisal management company/department prior to the appraiser being assigned to the order or scheduling the appraisal inspection.
Do you have to be a First Time Home Buyer to get an FHA Loan?
Absolutely not! FHA Loans are available to those that have owned a home, currently own a home and First Time Home Buyers.
Do FHA Loans require mortgage insurance?
Yes, the Federal Housing Administration (FHA) sets the mortgage insurance rates on all FHA Home Loans in the United States. Currently, the mortgage insurance rates on an FHA Purchase transaction with a 3.5% down payment is as follows:
Upfront Mortgage Insurance Premium: 1.75%
Annual Mortgage Insurance Premium: .85%
What is an acceptable property type for an FHA Loan?
A standard stick built home is best suited for an FHA Home Loan. Modular homes are also an acceptable property type and are treated like a stick built home for underwriting purposes. Manufactured/Mobile homes are not as widely accepted and FHA lenders are hesitant to lend on them due to their declining property values and higher collateral risk.
Is there a minimum credit score for an FHA Loan?
Typically, the minimum credit score range starts at 600. However, 620 is preferred.
Is it very difficult to qualify for FHA home loans?
No way. Rather qualification for FHA loans is easier compared to other home loan programs. Since the government backs the loans, the risks associated for the lenders are lower and hence they are willing to lend money on flexible terms. The paper works are also lesser, so the processing time is lesser.
What is the maximum loan amount?
The maximum loan amount you are eligible for will depend on your ability to repay the loan, value of property and your credit history. Though FHA sets a maximum limit for each county and state, and the loan amount offered to the borrowers cannot exceed this limit. For some low cost housing areas, the maximum limit is $271050 and that for some high cost area is $397500 – for single family units.
What is an FHA home loan?
FHA home loans are mortgages insured by Federal Housing Administration. Since these loans are backed by the government, lenders are willing to lend money to borrowers with more flexible credit qualifications and attractive terms so a larger segment of the population can qualify for these home loans.