The Mortgage Outlet wants you to have a better Understanding of FHA loans when Buying a home in Sayviile New York. If you are currently thinking about purchasing a home, you may have already heard about FHA loans and how they can increase your ability in being approved for a loan.
The Scoop on governmnet insured FHA loans
The FHA (Federal Housing Administration) was created during the the Great Depression after many borrower's defaulted on their loans. Lenders became reluctant to approve mortgages for all, but the least risky of borrowers. If this sounds familiar, today’s mortgage market has led to a resurgence in FHA loans. The FHA does not lend money to borrowers. Instead, it insures the loans, so that a lender is able make loans to those borrowers who have a greater risk getting approved. Should the loan enter into foreclosure, the lender will not have to cover any losses.
How are FHA loans are different?
Unlike a conventional loans, FHA loans have their own underwriting guidelines. Because of the mortgage meltdown in 2008, these guidelines have changed and will continue to change due to constraints placed on the agency by our elected officials.
What makes the FHA Different?
The FHA allows for a down payment of as little as 3.5%. In contrast to conventional lenders, none of this down payment has to be the borrower's money, all of it can be a gift.
Seller Concessions:
The FHA allows the seller to help pay for up to 6% of the buyer's closing costs with the minimum 3.5% down payment. With a conventional loan, a buyer would have to put 10% down to receive the same 6% seller concessions.
Expanded credit guidelines:
Conventional lenders will not approve a borrower who has a bankruptcy, a foreclosure or a short sale on their credit report for a minimum of four years after the event was settled. Borrowers who have credit problems because of a bankruptcy or a short sale, may find it easier to qualify for an FHA mortgage.
Larger debt-to-income ratios:
This is the calculation that figures your monthly mortgage payment and your total recurring debt as a percentage of your adjusted gross income. Generally, conventional loans require that your total DTI ratio not to exceed 45% of your adjusted gross income. An FHA loan allows a maximum ratio of 50% with some lenders allowing DTI up to 55%. For more information on Debt-to income ratios, see our post on Debt-to income ratios.
Non-occupying co-borrowers:
THE FHA will allow a family member who will not occupy the home to co-sign your mortgage to help you qualify for the loan. Conventional lenders will not allow a co-signer with less than 20% down.
FHA Loans are assumable:
FHA loans allow the loan to be assumed by another borrower when the property is being sold. This is a great option for first time buyers who aniticipate selling a few years down the road. These record low mortgage rates will be not be around forever and will offer a future buyer the opportunity to assume the low rate. Most conventional loans do not have assumable options.
Maximum loan Limits:
Each county in the state has maximum loan limit that the FHA will allow. In 2013, in both Nassau and Suffolk counties, the maximum loan amount for a single family home is $729,750. A conventional loan's maximum loan amount is $625,000.
FHA Mortgage Insurance Premium (MIP):
FHA insured loans require mortgage insurance to protect lenders against losses that result from defaults on home mortgages. The mortgage insurance premium (MIP) guarantees that there will be funds available to buy the loan back from a lender, should the need arise. The upfront cost of the MIP is 1.75% of the loan amount which is typically financed into the loan amount. The monthly mortgage insurance premium varies depending on your down payment and the term of your mortgage, but should not exceed 1.30% of the loan amount.
The Mortgage Outlet has over 25 years of experience approving home 
buyers who do not qualify for the rigorous guidelines of conventional underwriting. Call David Bailey, NMLS 3458, at 631-767-8948 to set up a private one-on-one meeting to see how much you qualify for.
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