FHA Mortgage Loan Programs
What are the FHA Mortgage Loan Programs for purchasing or refinancing a home?
The Federal Housing Administration, also known as FHA, offers affordable mortgage home loans for families and individuals who may not qualify for traditional conventional loans.
FHA has created a borrower paid FHA mortgage insurance policy that protects the mortgage lenders from any losses that the lender may incur as a result of issuing loans with lower credit scores and down payments.
FHA offers several mortgage loan programs for both purchasing or refinancing a home. The FHA requirements and guidelines for these loan programs allow for lower credit scores, and down payments. FHA has a maximum loan limit based upon the county the property is located in.
The 5 Types of FHA Mortgage Loan Programs
1. FHA Purchase Loan
This FHA Purchase loan program is designed for borrowers who do not have the traditional 5% down payment, and or a minimum credit score of 620 that other loan programs like conventional loans require.
FHA purchase loans are only offered for primary residence properties. These loans are not available for second homes or investment properties.
What is FHA’s Purchase Loans Down Payment requirements?
|
Credit Score |
Down Payment Required |
|
550-580 |
10% |
|
580 + |
3.5% |
What are the benefits of using FHA Purchase Loan?
The main benefits to using FHA Purchase loans is that it will allow approvals on credit scores less than 620 with a minimal down payment. In addition, because FHA is a mortgage lender insured program, the interest rates offered on FHA mortgage loans are generally lower than a conventional mortgage loan.
2. FHA Streamline Refinance
This FHA Streamline Refinance program is for borrowers who have an existing FHA-insured mortgage and would like to refinance to lower their monthly payments. The payments can be lowered by obtaining a lower interest rate and or lower FHA monthly mortgage insurance premium.
If your FHA mortgage is less than 36 months from the date of origination, than you will be entitled to an FHA mortgage insurance refund that is prorated based upon the number of monthly payments made prior to the new refinance request.
What are FHA Streamline Refinance Requirements?
- No 30-day late payments in last 12 months
- No minimum credit score requirements
- Must be employed or retired with source of income
- No appraisal required
- Single Family Homes 1 to 4 units
- Net Tangible Benefit that verifies a monthly payment savings each month.
What are the benefits of using an FHA Streamline Refinance?
- Lowers your monthly payments on your mortgage
- No income documents required
- No real estate appraisal required
- No credit score required
3. FHA Cash-Out Refinance
The FHA Cash Out Refinance gives homeowners the ability to access the equity in their home. Under this FHA cash out program, you will be able to pay off your existing mortgage, and access the remaining equity in your home up to 80% of the appraised value of your home.
Many homeowners will use the equity in their home to pay off other bills like credit cards, auto loans and personal loans or for home improvements.
You do not have to have an existing FHA mortgage loan to qualify.
What are the FHA Cash Out Requirements?
To qualify for an FHA Cash Out Refinance, you will be required to have a minimum credit score of 580 and the maximum loan to value is set at 80%. This means that if your home value is $100,000, then 80% loan to value would be $80,000 as your maximum allowed loan amount.
FHA Cash Out underwriting guidelines
- 580 minimum credit score
- Maximum loan of 80% the value of your home
- Chapter 7 bankruptcy must be greater than 2 years from discharge date
- Chapter 13 bankruptcy is allowed with 12 months payment history
- Verification of Income
- Real Estate Appraisal
What are the benefits of using an FHA Cash Out Refinance?
An FHA cash out refinance gives homeowners the ability to use the equity in their home to pay off other debt obligations and in many cases lower their total monthly bills or any other intended purpose. These cash out loans offer lower interest rates compared to unsecured loans.
FHA cash out loans provide lower interest rates and lending terms, than a conventional mortgage loans for borrowers with credit scores below 680. FHA finance charges can be lower because these loans are insured by the Federal Housing Administration.
4. What is an FHA 203(k) Loan
The FHA 203(k) is a home improvement and purchase home loan. The FHA 203(k) allows you to finance both the purchase of a home and the cost of renovations or repairs in one loan. The loan amount is based on the value of the home after repairs are made.
The FHA 203(k) will give you the ability to finance the cost of improvements you want to make to a home that you are purchasing. The cost of home improvements will be held in a separate escrow account, and funds will only be released once the work is completed and inspected.
FHA 203(k) Requirements
- Minimum credit score of 580
- Minimum down payment of 3.5%
- Verification of Income
- Requires General Contractor’s
- Appraised value based upon scope of home improvement work to increase property value.
What are the benefits of using a FHA 203(k)?
The FHA 203(k) is a great loan program to accommodate work that you would like to have completed on a home that you are purchasing.
Many home-buyers see potential in properties, but would like to make changes to the home, like adding additions, complete upgrades to kitchens, bathrooms and flooring. These affordable rehab mortgage loans give you the ability to purchase a home and make minor to substantial changes to the home.
5. FHA Energy Efficient Mortgage (EEM)
This program allows borrowers to finance energy-efficient improvements for their home, such as new windows, insulation, or HVAC systems. The cost of the improvements is added to the mortgage loan amount, and the borrower benefits from lower utility bills and a more comfortable home.
What are the Benefits of FHA Energy Efficient Mortgage loans?
- Upgrade appliances
- Energy efficient windows
- Solar Panels
- Water Heaters, air condition
- Home Insulation
- Roofing improvements
Under the terms of an FHA loan, you can increase your total loan amount for energy-efficient improvements by up to:
5% of the value of the property, to a maximum of $8,000
115% of the median price of a single-family home in your local area of residence
150% of the conforming Freddie Mac limit for your area
FHA Loan Programs Summary
The Federal Housing Administration has created these affordable government insured loan programs to help homeowners and homebuyers purchase and refinance homes with lower credit score requirements and down payments.
If your credit score is less than 620, and you are considering purchasing, refinancing or remodeling a residential primary residence home, then FHA is a perfect solution that will most likely meet your requirements.
