FHA Loans in Burlington, VT - More and more people are purchasing and refinancing their homes with FHA loans... and for good reason. FHA loans are ideal for first time home buyers, but you do not need to be a first time home buyer to take advantage of this attractive loan program. You can actually buy your third or fourth home with FHA loans, with the stipulation that you only have one FHA loan at any given time. FHA loans are insured by the Federal Housing Administration, which is part of the US Department of Housing and Urban Development (HUD). While conventional home loans through Fannie Mae or Freddie Mac have seen much tighter underwriting guidelines and more expensive mortgage-insurance rates in the wake of the "mortgage meltdown", FHA loans are insured by the federal government, so lenders can still offer more attractive terms along with lower down-payment requirements and easier credit qualifications.
FHA loans do not require a large down payment - an advantage not only for first time home buyers, but even for the "move-up" buyer who may not be able to net out as much as they had hoped from the sale of their current home. Also more buyers would rather keep more of their cash in savings, especially in this uncertain economy. Home purchases with FHA loans require a low 3.5% down payment, and that can come in the form of a qualified gift. Also, the seller can contribute up to 6% of the settlement charges at closing. In addition, if the buyer cannot qualify on their own, FHA allows for a non-occupant family member to co-sign.
FHA loans can be used to purchase not only a single-family home, but also a duplex, three-unit or even a four-unit property, with 3.5% down. The buyer must occupy one of the units as their primary residence. While there are no income limits with FHA loans, as there are with no-money-down USDA Rural Development Loans, FHA loans do have lower maximum loan limits, depending on the county and the number of units of the property. For single-family homes in Vermont, for example, the loan limit for FHA loans ranges from $271,050 in non-metro areas, to $318,750 in Chittenden, Franklin, and Grand Isle Counties. For a four-unit purchase in these counties, the maximum loan amount is $613,000.
For purchasers of condominiums, FHA loans have become the loan of choice for more and more buyers, especially in markets deemed to be "declining" by the private mortgage insurance companies. With a conventional loan, some lenders might require 20% down for a condo purchase, as the lender might not be able to secure private mortgage insurance needed on conventional loans with less than 20% down. For FHA loans, on the other hand, "declining markets" are not an issue, as FHA uses federal mortgage insurance with a minimum 3.5% down.
The potential issue with condos and FHA is in the condominium project approval process. For condos not FHA approved, the "spot approval" can still be used to purchase a unit in a project that has had limited FHA involvement. However this process is currently set to expire for FHA case numbers ordered after January 31, 2010. The approval process will now be in the hands of Direct Endorsement Lenders, such as my lender, who has unconditional direct endorsement authority and the staff experienced in reviewing and approving condo projects for FHA.
Highlights of FHA Loans:
- Down payment - minimum of 3.5%, which can come from a qualified gift
- Seller concessions - up to 6% of the sales price to cover closing costs and pre-paid items
- Co-signing allowed with non-occupant family members
- Flexible lender underwriting - allows for credit scores as low as 580
- Not only for first time home buyers
- No income limits for FHA loans
- FHA 203(k) Rehab loan - allows for the refinance or purchase of a home needing some TLC
- Streamline refinance with no appraisal required
- Cash-out refinance up to 85% of the home value
- Federal mortgage insurance is usually less expensive than Private Mortgage Insurance (PMI)
- 30-Year fixed, 15-Year fixed, 3-1 ARM, and 5-1 ARM rates available
FHA loans have become more and more popular lately due to the tighter underwriting standards and higher cost of private mortgage insurance with conventional loans. But every borrower's situation is different. Seek the advice of an experienced loan originator to see if one of the many FHA loans is right for your situation.
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