WHAT ARE THE BENEFITS OF AN FHA MORTGAGE?
FHA offers low down payment options, eligibility with less than perfect credit, a loan at a reasonable cost, and help if there is ever trouble making the mortgage payment. Because an FHA mortgage insures the lender against loss, an FHA mortgage typically has an interest rate that is competitive with the best in your market and lower than the rates charged for subprime and other non-prime mortgages. FHA not only helps people buy a home, but helps them keep it as well. In return for protecting lenders against loss, FHA requires financial institutions to offer assistance to borrowers experiencing difficulty making mortgage payments.
WHAT ABOUT ELIGIBILITY?
In order to be eligible for an FHA-insured mortgage, a borrower must:
• Occupy the property as the principal residence;
• Possess a valid Social Security Number;
• Have a two-year employment history;
• School and military service count towards this two-year requirement.
• Not be delinquent on any Federal debt such as a student loan or other FHA-
insured mortgage; and
• Meet flexible credit requirements.
THERE ARE SEVERAL OTHER FEATURES WORTH KNOWING ABOUT AN FHA¬INSURED MORTGAGE:
• FHA adopted the industry appraisal standards permitting the use of the Fannie Mae appraisal forms with no additional specialized documentation, no Valuation Conditions form or Homebuyer Summary.
• FHA has eliminated unnecessary requirements to make minor repairs.
• The homebuyer and the seller, individually or jointly, can pay closing costs as agreed to in the sales contract. FHA no longer limits what closing costs the homebuyer is permitted to pay.
• Caps on payment and debt-to-income ratios are more generous than most standard conforming mortgage products. The payment-to-income ratio may not exceed 31% and the debt-to-income ratio may not exceed 43%.
• A minimum credit score is not required. In fact, one may not be turned down for an FHA mortgage solely for lack of credit history.
• The buyer’s entire cash investment—as little as three percent—can be a gift from a family member, employer, charitable organization or local government entity.
• The seller can contribute up to 6% of the home’s price toward closing costs through a seller’s concession.
• There are no prepayment penalties on FHA-insured mortgages.
• U.S. citizenship is not required but, for those who are not citizens, they must be lawful permanent or non-permanent resident aliens with a valid Social Security Number.
