FHA Loans: All You Need to Know

The Federal Housing Authority backed mortgage, also known as FHA loans make home-ownership an achievable dream for many first-time homebuyers – thanks to flexible borrower requirements. Compared to conventional loans, FHA loans are easier to obtain due to many reasons, such as a low down payment of only 3.5 percent, and a low credit score. Despite it being an easy financing option, not everyone qualifies for FHA loans as there are few criticalities involved. In this article, we discuss these all the aspects of FHA loans. Let’s start.

FHA Loans: Mortgage for Primary Residence

Federal Housing Authority doesn’t directly provide FHA loans to people. Borrowers get this loan from  FHA-affiliated lenders, and FHA’s task is to insure the loan. There are numerous FHA loan lenders in Texas, Virginia and other states who provide these loans based upon a uniform set of  guidelines set-up by the FHA. The FHA, however, provides flexibility to lenders in setting standards for determining basic requirements and loan eligibility.

FHA loans are financed only for borrower’s principal residence that needs to be owner-occupied. This loan may not be utilized for rental properties or any other form of investment. Other properties eligible for FHA loan includes: townhouses, row houses, detached and semi-detached houses.

Maximum Loan Amount

The maximum loan amount a borrower can receive with FHA loan program depends on two factors:

1.      The statutory limit for the geographical area where the property is located.

2.      The loan-to-value ratio for the specific property.

Though, with all these factors in hand, in most areas loan limit is $271,050; however, in costly areas such as Alaska and Hawaii it goes up to $625,550.

Credit Score Requirement

A minimum credit score requirement for getting any conventional loan is 620, however, a credit score of 500 works for FHA loans. It means that people with poor credit score may easily qualify for FHA loan programs. Though, a borrower may be disqualified from availing this loan scheme in certain situations such as if he fails to make timely payment of bills or any other dues.

Employment and Income Requirements

Borrowers with basic eligibility criteria of stable employment and income are eligible for FHA loan program. Usually, lenders like to see two years of steady employment history and lenders also expect borrowers to continue the job for at least next three years after obtaining the loan.

Conclusion

Keeping these factors in mind you can see that the FHA loan program is much more flexible than any other conventional loan programs. Therefore, if you are facing financial crunches, but still have a dream to own a home, the FHA loan program is the right way to go.

VA Loans Eligibility Criteria: Do You Qualify the Maze?

When it comes to the qualification criteria of traditional loans, veterans and other military service members are at a disadvantage due to the nature of their jobs. As they are often transferred from one place to another, it is difficult for their family members to get a steady job at one place -- leading to fluctuations in their credit score. To help them get a home of their own, the Department of Veteran Affairs, started VA loan program. These government backed loans offer equal opportunity to all qualified veterans to obtain finance for their primary residence. This brief read discusses four key essential elements required for VA loan approval.

Eligibility

To get approved of a VA loan, the borrowers must satisfy at least on the following requirements:

●       Veterans who have served during the WWII for required period

●       Service members who are currently on duty and fulfil minimum active duty service requirement

●       Certain Reservists and National Guard Members

●       Surviving spouses of deceased veterans

Property Entitlement

According to guidelines stipulated under VA loan, the benefit of the loan can be availed only for owner-occupied properties. The list of property eligible for VA financing include:

●       Single-family homes

●       VA-approved condos

●       Townhouses

●       Multi Family homes

In addition to this, VA also includes financing for modular homes if they are used as permanent residents; however, not all lenders offer VA loan for them.

Owner Occupancy

According to law, VA borrowers must occupy the property, for which they have applied for a loan. VA borrower is required to give in written the proof that they will occupy the home within a reasonable time. The time flexibility given to borrower is within 60 days of closing. Borrowers deployed far from the place are given the extension of 12 months. In the absence of borrower, the only spouse is eligible to satisfy the occupancy requirement in a VA-eligible borrower’s stead. Borrowers qualify for refinance loans only when they have occupied the home in the past.

Income & Credit

Though there is no fixed credit score limit stipulated under VA loan, the lenders are given some flexibility to decide whether a borrower is a safe lending prospect within VA guidelines. The VA, however, recommends borrowers have no more than 41% debt-to-income ratio and sufficient residential income to sustain living expenses. Having said that, refinancing in VA loan doesn’t require income and credit re-qualifying.

Conclusion

As bankers are tightening their lending standards, the market has witnessed a surge in demand for VA loans. To qualify for a VA loan, the borrower must have sufficient income, suitable credit and a valid certificate of eligibility. Once approved the loan amount may vary depending on borrower’s entitlement and ability to pay.

Mortgage Refinance Programs: All You Need to Know

When home mortgage rates drop, it is natural for home mortgage borrowers to go for refinancing programs. This way, they reduce the amount of interest paid on home loans, which forms a notable part of their financial obligations. Although refinancing has its pros and cons, knowing the right time and the type of refinancing program help you take a right decision. In this article, we have discussed some refinance programs available and their finer lines.

Federal Housing Administration Streamline

Federal Housing Administration (FHA) Streamline refinance program is an ideal option for the borrowers who have an FHA mortgage. The program is an alternative to traditional FHA mortgage with better terms and low monthly payments. FHA loan approved borrowers do not need to submit new documents stating financial situation or new income qualification for FHA streamline refinance program. This type of refinancing also doesn’t require any:

●       Home appraisal

●       Termite inspection

●       Credit report

The only little drawback with FHA streamline program is that it doesn’t allow a cash out.

Veteran Affairs Streamline

Similar to FHA refinance, Veteran Affairs (VA) streamline refinance program has lower interest rate than the original VA loan. Again, you must have a VA loan to qualify for the VA streamline refinancing and should go for it, only if it is available at low rates. Moreover, some VA loan lenders may require an appraisal and credit report for VA streamline refinancing.

Home Affordable Refinancing

This type of refinancing option is specifically for borrowers who were not able to avail FHA or VA refinancing due to the depreciating home value. This type of refinancing program increases the long-term affordability of loans, saving borrowers from a foreclosure if they are unable to repay the loans on time. Borrowers make the most of Home Affordable Refinancing if their mortgage is securitized either by Fannie Mae or Freddie Mac. Moreover, borrowers must be up-to-date with their current payments, and the income must be enough to afford a new mortgage.

Conclusion

Any good refinancing program applied during a period of low-interest rate should benefit the borrower by lowering their monthly housing payments and shortening the mortgage term. Borrowers, however, need to be careful while taking the advantage of such refinance programs as there are complexities that can trip a poorly informed borrower and result in a raw deal. It is always advisable for borrowers to consult refinance experts before signing the dotted line.