What is an FHA Mortgage?
An FHA Mortgage or (Federal Housing Administration ) insured loan was created to protect lenders from losses should the economy once again tank.
The borrower does receive benefits from the loan. First, benefits from the meticulous appraisal of the home, and second, from the low down payment requirements and attractive interest rates offered by lenders.
Now that you know what is FHA financing, find out the eligibility requirements
Eligibility Requirements:
Although the Federal Housing Administration won’t be loaning the money to you directly (you’ll see a conventional lender for that), they’ll take a look at your credit profile to determine whether they want to offer insurance on your loan.
Recent FHA changes call for a manual review of applicants with credit scores below 680 and debt-to-income ratios of 42 percent or higher. While these conditions don’t automatically disqualify a borrower, it does decrease the number of 
applicants who qualify.
Remember, the lender may have stricter requirements, so it’s always a good idea to take a look at your credit reports, fix any errors, and pay down some of your debt before applying for a mortgage.
What Down Payment is required with FHA financing?
Homebuyers love the low down payment aspect of the FHA loan. Although lending criteria has tightened since the economic downturn, down payment requirements are still low – as low as 3.5 percent of the purchase price of the home.
What is FHA Financing
An applicant with a FICO score lower than 680 may have to pay a higher percent down payment, while those with higher scores – assuming they have adequate income and meet other loan requirements – typically qualify for the lower down payment.
Mortgage Insurance:
PMI is – Private Mortgage Insurance. It’s that policy they pay for but derive no benefit from. PMI protects the lender in case the borrower defaults.
FHA-insured loans also mandate mortgage insurance, but it’s known as the Mortgage Insurance Premium (MIP) instead of PMI. As with PMI, FHA at one time allowed borrowers with a 78 percent loan balance to cancel their mortgage insurance premium.
New FHA borrowers (since June 3, 2013) with low down payments (a starting loan balance of more than 90 percent of the value of the home) must pay for MIP as long as they have the loan.
Before settling on an FHA-backed loan, ask your mortgage broker to run scenarios comparing it with conventional loans as well as Fannie Mae’s “My Community” loan program and Freddie Mac’s “Home Possible” mortgage. You may find a better deal than FHA.
Keep in mind that FHA guidelines may change your lender will be able to lead you through the process and answer all your questions
Conditions that all properties must meet to pass an FHA Appraisal Inspection
- There must be no structural deficiency in the foundation, floor support system, framing or roof. If there are, a report from a qualified engineer regarding the cause or proposed correction must be submitted to the appraiser.
- The attic, basement and crawl space must be accessible and have adequate ventilation. The crawl space/ basement must be dry. If dampness is noted, a qualified inspector must submit evidence that the problem has been corrected. The crawl space must be at minimum 18” measured from the bottom of the floor joist.
- The crawl space/ basement must be dry. If dampness is noted, a qualified inspector must submit evidence that the problem has been corrected. The crawl space must be at minimum 18” measured from the bottom of the floor joist. The grading of the lot must provide drainage away from perimeter walls of the dwelling
- All mechanical systems must be operating at the time of inspection, be adequate for the dwelling and meet town regulations.
- All utilities must be on and operable at the time of inspection.
- There must be a heat source in all rooms or adequate heat from a source located in another room.
- There must be electrical outlet(s) in each room Heat sources must be permanently affixed and fired by gas, electric, propane or oil
- Space heaters are acceptable if they are common to area, thermostat controlled, located centrally for proper heat distribution, permanently affixed, vented and area adequate to heat the dwelling.
- Generally, hot water tanks cannot be located within the living space (kitchen, bathroom, bedroom. Etc.…) Check with your local building department code.
- If hot water tanks are the in-closet type, these areas must have a permanent vent.
- Private water systems (wells) must be tested by the state or local HUD office/HOC to determine acceptability. (Only in the case of a transfer of ownership).
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Lead base paint hazard: Correct all defective paint surfaces for homes built prior to 1978. This includes entire interior and exterior of the dwelling, as well as attached and detached garages and other exterior improvements (barns, fences, etc.….) All repainted surfaces must match existing areas.
- Exterior wood surfaces which are rotted must be replaced.
- All balconies without railings require access door to have a key bolt at least 60” from the floor.
- If There is evidence or indication that suspected asbestos-containing materials are present in the subject property, the appraiser must note on the report if it is not contained or it is deteriorating.
- All insect infestation must be addressed by qualified contractors.
- All condominiums and planned unit developments must be on FHA approval list or accepted through reciprocity.
- All flooring must be clean and adequately maintained.
- All walls be cleaned and adequately maintained.
- The chimney must not have cracked or chipped mortar or loose bricks or cap.
- Smoke and carbon monoxide detectors are required by NY State Law.
- Any broken or missing fixtures must be repaired/replaced.
- All gutters and downspouts must be functional and typical for the area. A roof inspection by licensed contractor is required if the roof is leaking, worn or appears to have a remaining life of fewer than 2 years. If life to the roof is less than 2 years, it must be replaced.
- A roof inspection by licensed contractor is required if the roof is leaking, worn or appears to have a remaining life of less than 2 years. If life to the roof is less than 2 years, it must be replaced.
- Handrails must be in place in all stairwells or steps on the interior or exterior of a dwelling, where required for safety purposes.
- The rejection of a location is warranted only in instances where the property being appraised is subject to environmental hazards, noxious orders, offensive sights or excessive noise to the point of endangering the physical improvements or seriously affecting the livability of the point of endangering the physical improvements or seriously affecting the livability of the property, its marketing or the health and safety of its occupants.
- No dwelling may be located within 10 feet of the outer boundary of a high voltage transmission line easement, nor may the site be any closer than the fall distance of a structural tower supporting the lines.
- All other repairs that are “essential” to the health and safety of the occupants.
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