7 Things All Borrowers Should Know About FHA Loans

For Your Clients: 7 Things All Borrowers Should Know About FHA Loans

 
"We have seen home buyer interest in FHA loans go from practically zero three years ago to upwards of 87 percent today," said Christopher Gardner, founder and president of FHA Pros, LLC. "Despite this rapid rise in popularity, many buyers still do not fully understand the benefits of these loans, and we believe it's time to change that."

1. FHA Loans Are Not Only For Lower-Income Borrowers. FHA loans are available to everyone. In fact, even Bill Gates can get one. There is no maximum income restriction associated with FHA loans. Borrowers do need to substantiate income and assets by submitting proper documentation. This requirement ensures that borrowers are well-vetted and truly able to afford their future homes.

2. FHA Loans Are Not Only For First-Time Buyers. Many people believe FHA loans are available only to first-time homebuyers. This is not the case. Whether borrowers are making their first home purchase or their fifth, they can look to FHA loans as a home financing option.

3. FHA Loans Are Not Just Small Loans; In Fact, Loan Amounts Can Be As High As Almost $800,000. The government recently raised the maximum loan amount from its original cap of $362,790 to $793,750 as a way to help stabilize the housing market. The amount a buyer can borrow varies from county to county. Later this summer, condo buyers interested in FHA loans can visit www.checkfhaapproval.com to instantly identify FHA-approved condo associations and review maximum loan amounts for a given location.

4. FHA Loans Are Not Affiliated With The Section 8 Housing Program. While both programs are administered by the U.S. Department of Housing and Urban Development (HUD), FHA loans have nothing to do with low-income subsidized housing. FHA loans are simply mortgages insured by FHA. This insurance provided by the federal government allows lenders to lend more freely by assuring them that they will be repaid in the event of default. Most traditional lenders, including Wells Fargo & Co., JP Morgan Chase and Citigroup are able to provide FHA loans to their customers.

5. FHA Loans Are Often More Affordable Than Conventional Loans. While FHA loans typically offer the same interest rates as other loans, borrowers benefit from a much lower down payment of as low as 3.5 percent.

6. FHA-Approved Condo Developments Are More Desirable To Buyers. With 87 percent of home buyers indicating that they plan to use FHA loans, condo associations that are not FHA approved are missing out on a significant pool of prospective buyers. Under rules in place since February 2010, an entire condominium development must now apply to HUD and be granted FHA approval before a buyer can purchase a unit in an association with an FHA loan or before an existing unit owner can refinance into an FHA loan.

Due to the general unwillingness of today's lenders to extend credit with respect to conventional loans, many borrowers find that FHA is their best bet. Lenders don't mind lending when the federal government (FHA) assures them of repayment.

Homeowners associations (HOAs) should note that although FHA-insured mortgages might be easier to obtain, they are not "risky" loans, due in large part to the strict "full documentation" requirements placed on borrowers.

Individual buyers or sellers can initiate the approval process or current owners can encourage their HOA to apply. More information about the FHA- approval process is available at www.getfhaapproval.com.

7. FHA Loans Are Assumable. In addition to lower down-payment and credit-qualifying requirements as compared to conventional loans, FHA loans are assumable. This means that when a seller with an FHA loan sells his or her property, the loan and its financing terms (interest rate) can be transferred to the new buyer. This unique feature will certainly make a property more valuable in times of rising interest rates.

"Now, more than ever, buyers and sellers need to understand the options available to them when it comes time to buy a home," continued Gardner. "At FHA Pros we have worked with countless HOAs, attorneys and individuals to easily and efficiently navigate the historically tricky FHA-approval process."

7 Things All Borrowers Should Know About FHA Loans
 
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Rainmaker
217,625
Yvette Chisholm
Long & Foster Real Estate, Inc. - Rockville, MD
Associate Broker - Rockville, MD 301-758-9500

While they require little down payment, the loans can be expensive.

Oct 04, 2011 04:36 PM #1
Rainer
203,079
Mary Macy
Top Agents Atlanta Metro - Roswell, GA
Top Agents Atlanta Metro

Great post on FHA loans, they are the loans that almost everyone is using right now to buy homes and this is good information for consumers.

Oct 04, 2011 04:38 PM #2
Rainer
483,224
Chandler Real Estate Liz Harris, MBA
Liz Harris Realty - Chandler, AZ
#ChandlerRealEstateAgent

The fact that they can be assumable is so very important!

Oct 04, 2011 04:40 PM #3
Ambassador
896,390
Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production

Rick...home run!  A great 1, 2, 3....all great points!!!!1

Oct 04, 2011 05:00 PM #4
Rainmaker
1,007,798
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

I also think that the percentage of borrowers using FHA loans has had a lot to do with the Realtor's opinions of FHA loans over the years.  I have always had great luck with FHA loans in the past, and have used them at least half the time... over the last twenty years of being an agent.

Oct 04, 2011 05:05 PM #5
Rainmaker
1,007,798
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Unless I am incorrect, which is entirely possible, FHA loans are NOT assumable.  They have not been so... for many years.  To my knowledge the lender must still approve the buyer for the loan to be "assumed"... and the lender also reserves the right to "adjust" the interested rate.  Is this still the way that it is ?

Oct 04, 2011 05:08 PM #6
Rainer
415,430
Jeff Ragan
Ming Tree, Realtors Real Living - Eureka, CA
Luxury Agent, Northern California

FHA loans can be used to buy a multi-family unit up to 4 units, as long as the buyer is planning to live in one of them.  I encourage young couples and single folks to consider this approach.  They can buy a 4 plex for a tad more than the rent they would pay to rent one of the units, live in the building for a couple of years, and then buy their dream home and have a rental property at a killer interest rate!

Oct 04, 2011 05:19 PM #7
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Rainer
204,302

Rick Payne "As Seen on HGTV House Hunters "

Real Estate Consultant at Keller Williams Realty
CALL 678-427-5512 or EMAIL repayne7@bellsouth.net NOW!!
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