The Federal Housing Administration (FHA) was established as part of the National Housing Act of 1934 in response to the banking crisis of the 1930s. The primary goal of the FHA was to improve and stimulate the housing market while protecting FHA-approved lenders from losses arising from borrowers defaulting on their mortgage payments. As of today, the FHA has insured over 34 million mortgages and is currently insuring 4.8 million single family mortgages across the United States. Absolute Home Loan Services, LLC specializes in FHA mortgage programs throughout Orlando and the surrounding Florida communities.
FHA loans are some of the easiest mortgage loans to qualify for which makes them a popular choice among first time home buyers. Loan programs are available for not only purchases, but refinances, reverse mortgages, and more. Below are the FHA Loan programs that are available.
FHA Fixed Rate – The most common FHA loan is the Fixed-Rate 203(b) loan. This loan is popular among first time home buyers with the ability to finance up to 96.5 percent of the value of their home purchase.
FHA Adjustable Rate – The Section 251 Adjustable Rate Mortgage is very similar to the Fixed Rate option, but as the name suggests, is available for adjustable rate mortgages.
FHA Graduated Payment Mortgage – The Graduated Payment Mortgage program offers mortgages with an initially low payment which grows over time. This program is designed for those who expect their income to grow substantially over the coming years to accommodate the increasing payment. Down payment requirements can be higher with this program.
FHA Reverse Mortgage – The Home Equity Conversion Mortgage (HECM) is the FHA’s reverse mortgage option that allows seniors 62 years of age or older to convert equity in their home into cash. There is no restriction on how these funds can be used. This is a great option for seniors who need cash for unexpected medical expenses or home repairs.
FHA Streamline Refinance – The FHA Streamline Refinance product allows borrowers with an existing FHA mortgage to refinance their loan into one with a better rate.
FHA Cash Out Refinance – The FHA Cash Out Refinance program allows borrowers to refinance their existing mortgage into one of a higher amount, providing them with the difference in cash for repairs or other expenses. There must be sufficient equity in the home for this refinancing.
FHA Standard 203k – The FHA 203k program is a renovation loan program that allows borrowers to finance a home as well as needed renovations into a single mortgage. The Standard 203k is for complex renovations that involve structural work, or construction that prevents you from occupying the home.
FHA Streamline 203k – The Streamline 203k program works the same as the Standard 203k, however it is designed for smaller improvements that will not exceed $35,000.
Less stringent credit requirements and low down payment options contribute heavily to the popularity of FHA loans. Borrowers can potentially qualify for an FHA loan with a down payment as low as 3.5 percent. If the borrower does not have the savings available to make this down payment, it can even be gifted from a family member. It is even possible to qualify for an FHA loan with a credit score as low as 500. FHA loans can also be assumable which means that if you want to sell your home, the buyer can take over, or “assume” the loan.
Typical FHA Loan Requirements
While these are the standard loan requirements, the criteria may vary based on the type of program the borrower is seeking.
- Credit Score – A credit score of a least 580 is required to qualify for an FHA loan. With a credit score between 500 and 579, you may be able to qualify with a higher down payment of at least 10 percent of the purchase price.
- Income and Debt – Your debt-to-income ratio must be 43 percent or lower. In special cases, a debt-to-income ratio of up to 50% percent may be approved.
- Down Payment Requirements – A down payment of only 3.5 percent of the purchase price is the minimum requirement for an FHA loan.
- Property Appraisal – The property being purchased must meet certain safety, security, and soundness (structural integrity) requirements. An inspection will be conducted by an FHA-approved appraiser.
There are two types of mortgage insurance premiums (MIP) that must be paid with an FHA loan. One is paid up front, and the other is paid monthly.
- Upfront mortgage insurance premium – An upfront premium of 1.75% of the home loan is required with an FHA loan. The borrower has the option to pay this upfront or roll it into the mortgage itself.
- Annual mortgage insurance premium – This is an insurance premium, paid monthly, that is based on loan-to-value (LTV) ratio, loan amount, and length of the loan. This can range between .80% and 1.05%.
Maximum loan amounts for FHA loans are limited by county.
Absolute Home Loan Services, LLC is a local Florida lender with the knowledge and expertise to assist borrowers with the many FHA programs that are available. Whether you are looking to refinance an existing Adjustable Rate FHA loan into a Fixed Rate program, or are ready to purchase your very first home, we work closely with each and every client to achieve the best rates possible on an FHA loan that meets your needs. Contact Absolute Home Loan Services, LLC today to see how we can help you.