FHA loan programs:

FHA Access
FHA Cal Gold
FHA Rural Gold
FHA Mutal Mtg. Insurance
FHA 203 (k)
FHA 203 b
FHA 251
FHA Title I program
FHA MIP Refund

The Federal housing administration was created by Congress in 1934 as part of the national housing act. The purpose of the act, and of the FHA, was to generate new jobs through increased construction activity, to exert a stabilizing influence on the mortgage market, and to promote the financing, prepared, and sale of real estate

nationwide. Today, the FHA is part of the Department of Housing and Urban Development (HUD).

The FHA’s primary function is to insure loans. FHA approved lenders are insured against losses caused by borrower default.

The FHA insurance program is called mutual mortgage insurance plan (MMI). Under the plan, lenders who had been approved by the FHA to make insured loans either submit applications from prospective borrowers to the local FHA office for approval, or, if authorized by the FH to do so, from the underwriting functions themselves. Lenders who are authorized by the FHA to fully underwrite their own FHA loan applications are called direct endorsement lenders (DE Lenders). A direct endorsement lender is responsible for the entire mortgage process, from application for closing. When a direct endorsement lender has approved and closed a loan, the application for mortgage insurance is submitted to the FHA.

As the insurer, the FHA incurs full liability for losses resulting from default and property foreclosure. In turn, the FHA regulates many of the terms and conditions of the loan. FHA regulations have the force and effect of law.

FHA loan features.

Any loan intended for submission for FHA insurance has a number of features that distinguish it from a conventional loan. The most significant of these features are:

1. Less stringent quality standards. FHA will allow re-establishment of a credit within two years after a discharge of bankruptcy, when any judgments have been fully paid, any tax liens have been repaid, or a repayment plan has been established by the IRS, and within three years after a foreclosure has been resolved.

2. Low down payment. The 3% cash down payment is generally less than for a similar conventional loan.

3. No secondary financing is allowed for the down payment. The FHA minimum down payment for a loan must be paid by the borrower in cash. The borrower is not allowed to resort to secondary financing from the seller or from any lender to make up any part of the down payment. The FHA permits the use of either a nom- repayable gift of money, credit from a portion of rents from pay rent/purchase contract between a buyer and seller, or some home repairs made by the purchaser (sweat equity) to be used to satisfy the 3% down payment costs.

4. Some closing costs may cover the down payment. While a borrower may not finance any of the closing costs along with the sales price, FHA permits the use of some closing cost to satisfy the 3% down payment requirement.

5. FHA mortgage insurance is required for the loan regardless of the amount of the down payment.

6. No prevent penalties are allowed. FHA loan may be paid off in full at any time with no additional charges. A lender is allowed to require that any such payment be made on a regular installment due date.

7. The property must be owner occupied. The FHA used to insure investor properties but they have virtually eliminated all such programs. Two-to-four unit properties qualify if they are owner occupied.

Other characteristics of FHA loans.

The typical FHA loan has a 30 year term. However, FHA offers long terms as short as 15 years. They also offer adjustable loans and home repair loans. The rate is fully negotiable between the borrower and lender. They still tend to be lower than college loan rates because the lenders risk is lessened by the FHA mortgage insurance.

A lender may only charge 1% ordination of the own FHA loan, but is allowed to charge discount points. Typically, discount points allow a lender to recover and the interest loss upfront. Although discount points may be paid by the buyer in an FHA transaction, they are almost always paid by the seller.

The lender is required to obtain an appraisal of the property from an FHA approved appraiser. The a praise it will note any health and safety deficiencies and necessary repairs needed on a validation conditions form. The lender is required to provide the buyer with a home-buyer summary of all the deficiencies noted by the appraiser. All problems with health and safety conditions, as well as necessary repairs, must be completed before the FHA will issue insurance on the property.

Income qualifications and a maximum amounts.

There is no minimum income requirement for an FHA loan. Borrowers of the show two years of steady employment and demonstrate that they have consistently paid their bills on time. The FHA has a ratio of 29% and 41%. This means that a payment for a home loan may not exceed 29% of the borrower’s gross monthly income and all installment debt, including the home loan payment, may not exceed 41%.

The FHA sets maximum mortgage loan amounts. These amounts, which vary by state as well as location within a state, are adjusted yearly. FHA loan limits are found on HUD website.

Martin Lukac, represents http://www.RateEmpire.com, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! Visit http://www.RateEmpire.com today

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Most consumers are told where to get their mortgage because few people personally know and trust a mortgage or loan officer or correspondent (the same thing). It used to be agents would take their buyers out to find the house they wanted, then to their favorite mortgage company. Now things are so fast and better organized. It is common practice to have the purchasers prequalified and preapproved before searching for their new home. Most agents don’t know much about finance, they leave it to the mortage company to explain it.

Probably the most important thing is comparing. I don’t understand this, unless it is young people who just don’t know. Most people compare prices of other thing; cars, gas, food. It’s not only important to check interest rates but also APR or annual percentage rate. This takes all of the mortgage company charges and breaks it down into a rate that many times is published by several in the newspaper. You can see 5.49% v 6.11%. It sounds like a little but it means a lot!

Different types of financing are available. This is something your agent should be well aware of as well as the mortgage company. I remember a time I was working with a young couple. I knew the best loan for them was a combination of FHA and a state subsidized loan. This gave them the lowest down payment and interest rate. The people at this very well known world wide mortgage company said “you can’t do that” to which I REPLIED, here is the number. I was surprised. The couple did get the house with exactly that financing. Please rate and tell friends.

More to come later: http://www.freewebs.com/realestatenews.

Suzie is a licensed real estate broker and certified residential appraiser with twenty years of experience with hopes of changing the industry for the better one step and one person at a time. She has other professionals in the field who are contributing their expertise as well. http://www.freewebs.com/realestatenews

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A committee appointed by President Bush has come up with an alarming recommendation. They want to limit the tax deduction for mortgage interest!

Reform

Following his re-election, President Bush set up an aggressive agenda in which he hoped to reform social security and the tax code amongst other things. As with many things in the political world, this sounded easier done than it really was. With social security, political forces have forced the President to pull back from private accounts. With tax reform, a similar political and practical mistake is being made.

Limited Deduction

The bipartisan tax reform committee appointed by President Bush is making a mess of things. They are proposing the elimination of the Alternative Minimum Tax, which is clearly a good thing. Unfortunately, they are also proposing a limit on the tax deduction you can take for mortgage interests.

Although the final recommendations are not yet published, leaks have led to the belief the tax reform committee is going to propose the mortgage interest tax deduction be limited to the percentage of any loan that the Federal Housing Administration would write. Put another way, you would only be able to write-off interest on the first $315,000 of a mortgage! On top of this disaster, the committee is proposing to eliminate the deduction for property taxes.

Economic Disaster?

The implementation of the above recommendations would be an economic disaster for the United States. The real estate industry would suffer incredibly and the real estate boom would become a bust. In many parts of the country, a single family home averages well over $315,000. In San Diego, the average cost of a home is in the $600,000 range. To get into such homes, many families apply for interest only loans to make ends meet. If they lose half of the interest deduction, default will not be far behind.

Once again, we are faced with a situation where politicians just don’t get it. Our housing market is incredibly strong and they want to throw a wrench in the process. Developers and homeowner associations have vowed to fight this “tax reform”. You should as well if losing half of your deduction troubles you.

Sergio Haros is with Great Western Mortgage - San Diego Mortgage Brokers - providing San Diego home loans. Great Western Mortgage is a San Diego mortgage company writing San Diego mortgages and San Diego refinance and home equity loan.

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