FHA HOME LOANS – WHAT YOU NEED TO KNOW
An FHA loan is a government insured loan. They are very popular for 2 reasons:
1.) High Loan to Values – FHA will allow you to loan up to 96.5% of a home’s value on a purchase and rate and term refinance. You can also loan up to 96.5% Loan to Value when combining multiple mortgages as long as the 2nd mortgage was taken out over a year ago and credit has not been drawn on the mortgage/line of credit for the last 12 months.
2.) Low Credit Qualifications – FHA loans are fairly easy to qualify for. Some lenders will do these loans with a minimum of a 580 FICO score. You must be 3 years out of a foreclosure. 2 years out of a bankruptcy / short sale.
What you need to know about an FHA loan:
1.) FHA charges a 1.75% upfront mortgage insurance fee on the majority of its loans. The one exception is an FHA streamline on an existing FHA loan taken out before June of 2009. Sometimes a lender can eliminate this fee by giving you a higher rate and paying the fee for you.
2.) FHA also charges a monthly mortgage insurance fee. Here are the monthly mortgage insurance guidelines. To get your mortgage insurance amount – take insurance percentage, multiply times your loan amount and divide by 12.
30 YEAR FIXED FHA LOAN – or loans terms over 15 years
95% LTV and below: 1.75% upfront MI .85% Annual MI
Over 95% LTV: 1.75% upfront MI .8% Annual MI
15 YEAR FIXED FHA LOAN – or loan terms less than 15 years
0-90% LTV: 1.75% upfront MI .45 % Annual MI
Over 90% LTV: 1.75% upfront MI .70% Annual MI
ALL FHA STREAMLINES LOANS – original case number pulled before June of 2009
UPFRONT MI .01%
ANNUAL MI: .55%
30 YEAR FIXED FHA LOANS OVER $625,500 – or loans terms over 15 years
95% LTV and below: 1.75% upfront MI 1.00% Annual MI
Over 95% LTV: 1.75% upfront MI 1.05% Annual MI
15 YEAR FIXED FHA LOANS OVER $625,500 – or loan terms less than 15 years
0-90% LTV: 1.75% upfront MI .70% Annual MI
Over 95% LTV: 1.75% upfront MI .95% Annual MI
3.) FHA’s monthly mortgage insurance must be paid for the life of the loan.
4.) FHA allows for a streamline refinance. A streamline refinance is a new loan lowering your existing rate. You can do these without paying for a new appraisal or qualifying again based upon credit and income. There are a some guidelines to the streamline refinance:
-You must have been current on the mortgage payment for the past 12 months.
-If you do a streamline refinance without an appraisal, the max loan amount is the payoff of your existing loan + new FHA upfront mortgage insurance. Because of this, most customers focus on 0 to low closing cost loans as all costs and prepaid items must be paid for out of pocket.
-You can finance closing costs into the loan on an FHA streamline, but you must get an appraisal and finance below the 96.5% loan to value.
-FHA does not allow you to lower the term on a streamline refinance unless you qualify again with appraisal, credit and income.
5.) If you refinance from an FHA loan to a new FHA loan within 3 years, you will get a portion of the 1st mortgage insurance you paid back.
6.) FHA has max loan limits determined by county. To check your county’s FHA loan limits, visit:
In Summary, FHA loans are great loans for a customer looking to purchase without putting a lot of money down. They are also great loans to refinance with low equity or lower credit scores.
FHA loans do a lot of things that a normal conforming loan does not. It helps many consumers get a loan they otherwise would have not qualified for.
Reggie Green / Branch Manager at Fairway Independent Mortgage Corporation
480-206-5577 / email@example.com
NMLS #229993, AZ – BK 0913980, Fairway NMLS: 2289, Equal Housing Lender.
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FHA HOME LOANS – WHAT YOU NEED TO KNOW