Many people can benefit from the use of federally backed FHA loans but what exactly are FHA loans? The Federal Housing Administration, also known as "FHA", provides mortgage insurance on loans made by FHA approved lenders throughout the United States. FHA insures mortgages on single family and multifamily homes including manufactured homes. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.
An FHA mortgage is a good choice for a borrower that has a lower credit score but good recent payment history and credit. It can also be a good mortgage choice for somebody that has little or no down payment because FHA only requires a 3.5% down payment. If a 3.5% down payment is not possible, FHA will also allow the seller to gift 3% to the buyer. This must be done through one of the many down payment assistance programs (These programs are scheduled to terminate as of 10/1/2008).
Almost anyone can apply for an FHA loan which makes them a great choice for 1st time homebuyers. Some highlights of FHA loans are:
FHA Fixed Rate Loan
The most popular FHA loan option is the FHA fixed rate loan. It is called the 203(b) and is available for 1-4 family dwellings. The loan can be repaid over 15 or 30 years and is a good option for anyone that wants the stability of fixed payments. For those that want to take advantage of adjustable rate loans, FHA offers several options that might have lower interest rates than the fixed rate options
FHA Rehab Loan
FHA offers an FHA rehab loan called the 203(k). It allows home buyers to purchase a property and also include the costs of any rehabilitation that might be needed for the home. It also allows homeowners to refinance into a rehab loan and include the costs of the rehab into their new loan.
If you think an FHA loan might be right for you, ask a RefinanceFHA.org mortgage professional for more information. You should always compare conventional loans to government loans like FHA mortgages to see which one has the most benefits and fits your needs.
FHA Neighbor Next Door Program The Neighbor Next Door initiatives are a collection of FHA's home sales programs designed to help communities and promote homeownership. Help a neighborhood! Buy a home through HUD's Good Neighbor Next Door initiative designed to encourage renewal of revitalization areas by providing law enforcement officers, firefighters, emergency medical technicians and teachers an opportunity to purchase homes in these communities. HUD provides a substantial incentive in the form of a fifty percent discount off the list price of eligible properties. Learn more about HUD's Good Neighbor Next Door Sales program. Additional discounted sales programs allow local governments and qualified nonprofit organizations to purchase homes at a discount. Purchases and refinances: 1.75%. The monthly mortgage insurance premiums will be as follows: Purchase Transactions, Full-Qualifying Refinances, and Streamline Refinances: 30 Year Mortgages: loan to value <95 = 50 basis points 15 Year Mortgages: loan to value <95 = None FHASecure (delinquent loans): loan to value <95 = 50 basis points For reference: Loan to value is the ratio of the loan amount to the property value or purchase price, whichever is less. For example, a loan amount of $150,000 on a $200,000 home purchase would be 75% loan to value ($150,000 / $200,000). You can calculate the upfront mortgage insurance premium (UFMIP) by multiplying the percentage of UFMIP by the loan amount. According to the current FHA fees, a FHA purchase loan would require 1.75% UFMIP. On a $250,000 loan amount you multiply 1.75% (.0175) by the loan amount (.0175 x $250,000). The UFMIP equals $4375.00 in this example. Remember, the UFMIP is usually included in the loan and is not a cost that is paid in cash or out of pocket up front. More information on changes to the mortgage insurance costs, both upfront and monthly, will be released by HUD in the near future. If you need assistance with an FHA loan and are looking for the lowest interest rates and fees available, contact a RefinanceFHA.org mortgage professional today. Or simply Appy Today and we will have one of our mortgage professionals contact you.
FHA Mortgage Insurance Premiums
The current up front mortgage insurance premiums (UFMIP) as well as monthly premiums for FHA loans are no longer based on a risk model. The risk model affected the amount of upfront mortgage insurance premiums as well as monthly premiums based on the borrower's credit profile. As of October 1st, 2008 and until September 30th, 2009, the following FHA mortgage insurance premiums will be in effect. The upfront mortgage insurance premium (UFMIP) will be as follows:
Streamline refinances: 1.50%
FHAsecure: 3.0%.
loan to value >=95 = 55 basis points
loan to value >=95 = 25 basis points
loan to value >=95 = 55 basis points
How far behind can you be on a mortgage to qualify? What about more than 90 days?
There isn't a limit on how far behind you can be on your mortgage or how many payments you've missed. Whether you're one month behind or multiple payments behind, the amount you can refinance will depend on the value of your property and how much you owe and if the lender, or another eligible source, is willing to take back a second mortgage to help bridge the gap between what is owed and your home's value.
Must I be delinquent, and for a certain period of time, in order to be eligible for FHASecure?
Although FHA Secure is limited to borrowers who are delinquent, if you are current on your mortgage, you can still refinance into a standard FHA insured mortgage and, if willing, the lender can offer a second mortgage to help bridge the gap between what is owed and your home's value. FHA encourages homeowners facing reset to refinance before they fall behind on their mortgage.
I have a fixed rate mortgage and have fallen on bad times. What about me?
Homeowners facing financial difficulties and unable to make their mortgage payments are strongly encouraged to contact their lender. Many lenders offer assistance to their borrowers to help them bring their mortgage current. Homeowners may also want to contact a HUD-approved housing counseling agency to find out about programs that may be able to assist them, especially if communication with the lender has broken down. To find a HUD-approved housing counseling agency, please call 1-800-569-4287 or search
I have an interest-only mortgage. Am I eligible for FHASecure?
If your interest-only mortgage is also an adjustable rate mortgage, then it is eligible for FHASecure. At this time, interest-only fixed rate non-FHA mortgages or such mortgages with buydown features incorporated into the interest rate or payment options are not eligible. For now, FHA is keeping the focus for FHASecure on adjustable rate mortgages but may consider adding other types of non-FHA mortgages in the future.
Are there any programs for people already in foreclosure?
It is possible that FHASecure may help homeowners already in foreclosure but each situation is unique and depends upon the value of your home and how much you owe, and if the lender is willing to offer a second mortgage. Homeowners facing foreclosure are strongly encouraged to talk with their lenders, possibly with the assistance of a HUD-approved housing counseling agency, to determine the best course of action. To find a HUD-approved housing counseling agency, please call 1-800-569-4287
Paying Off Your Mortgage(S) And Your Home's Value
What if I have a prepayment penalty and other refinancing costs and there isn't enough equity in my home for me to refinance?
If you do not have sufficient equity in your home to add your prepayment penalty and/or other refinancing costs into your new FHA mortgage, then you should ask your lender to consider a second mortgage to pay the difference. Offering a second mortgage is at the discretion of the lender.
What if the average home price is above the FHA loan limit for my area. Are the FHA loan limits changing for this program?
FHA's geographical loan limits and how much it can insure are established by law. Although the FHA insured mortgage cannot exceed those loan limits, when a lender is willing to combine a first and second mortgage, the amount of the second could exceed the maximum loan limit for your area.
Does it matter that the value of my home is now less than what I still owe?
Not to FHA but the mortgage lender considering the refinance would have to be willing to accept a short payoff on the existing loan OR to hold a second mortgage to make up the difference needed to pay off the existing mortgage and the home's value.
If I have first and second mortgages can both loans be included in FHASecure?
Yes, but only if the combined amount is within the FHA geographical loan limit. If the combined amount exceeds the FHA loan limit and/or the loan-to value limit, your lender could offer you a second mortgage to make up the difference.
How can FHA help homeowners stay in their homes?
FHASecure gives homeowners with non-FHA adjustable rate mortgages (ARMs) that have had an interest rate reset the ability to refinance into a FHA insured mortgage. To be eligible, homeowners must have made their mortgage payment within the month due for the six months prior to their loan resetting, and be delinquent on their mortgage as a result of the reset. With FHASecure, the lender will not automatically disqualify you because you are delinquent on your loan, and the lender may offer you a second mortgage to make up the difference between the value of your property and what you owe, including standard refinancing costs.
For homeowners who are current on their mortgages and who have or will have an interest rate reset, FHA offers refinancing programs that also permit the lender to offer a second mortgage to make up the difference between your property's value and what you owe.
Why should I consider refinancing into a FHA insured mortgage?
FHA insured mortgages do not allow for prepayment penalties, teaser rates or balloon payments. They are offered at market rate with terms up to 30 years and are fully amortized, meaning that you pay towards principal and interest every month.
Is this program going to help people who shouldn't have gotten a home loan in the first place?
People will still have to qualify for a FHA insured mortgage. Unfortunately, those who shouldn't have gotten a home loan in the first place will not be able to qualify for FHASecure or other FHA refinancing options. They should contact their lender or a HUD-approved housing counseling agency for assistance. To find a housing counseling agency, homeowners can call 1-800-569-4287 or visit
If this program won't help everyone, why is FHA making it available?
FHA recognizes that foreclosures and vacant properties affect home values, contribute to neighborhood decline and cost local governments due to additional services and lost revenues. FHA is offering this program to help prevent that type of negative impact on a community.
What is this program going to cost taxpayers?
Because the borrower pays the FHA mortgage insurance premium, taxpayers do not pay for FHASecure or other FHA programs. FHA borrowers pay their own way, and potentially avoid foreclosures that contribute to neighborhood decline, property depreciation and decreased revenues to the locality.
Does this program help responsible people who pay their bills on time?
Any homeowner who is current on their mortgage can refinance to a FHA insured loan at any time if it makes financial sense for them to do so. And for those homeowners with non-FHA adjustable rate mortgages who are current but owe more than their home is worth, it is now possible for them to refinance into a more affordable FHA insured mortgage and the lender may execute a second mortgage at closing to pay the difference.
Why isn't FHA going after the lenders who approved these types of loans in the first place?
FHA was established to insure mortgages. It does not have the authority to regulate transactions that do not involve FHA financing.
