FHA LOAN BASICS
DOES FHA LOAN REQUIREMENTS APPLY TO ALL BORROWERS?
This question is complicated and depends on whether it pertains to credit requirements? appraisal rules? or other areas that may apply.
BORROWERS CANNOT BE REJECTED FOR AN FHA LOAN
On factors that have nothing to do with financial qualifications, employment, income, being an owner/occupier, etc. However, some homes may not qualify for FHA and/or borrowers may be denied a loan because he or she doesn't intend to live in the property as the primary residence, or because of factors that affect the economic life of the property. The only constant is that all FHA borrowers obtain identical treatment is the process under Fair Housing law standards.
FHA RULES ON CREDIT SCORE AND STANDARDS APPLY TO ALL BORROWERS
If you apply for a new purchase mortgage, some requirements will affect your transaction including FICO score rules, down payment requirements and Mortgage terms. But the nature of your transaction will play a role in this area too. By example, the requirements for an FHA reverse mortgage are different for a new purchase loan. FHA reverse mortgages have a minimum age requirement of 62 or older which does not apply to general FHA purchase or refinance loans which requires the borrower to be of legal age to execute a legally binding contract.
FLOOD OR NATURAL DISASTER ZONES.
FHA rules in flood or natural disaster zones. Depending on circumstances if you are purchasing a home in a flood or natural disaster zone. You may be required to carry hazard insurance as a condition of your approval.
HOMES DAMAGED BY ILLEGAL MANUFACTURE OF DRUGS
FHA rules for purchasing property that was damaged by illegal manufacture of drugs. More specifically, any home known as a former “meth house” would be subject to FHA appraisal rules governing the abatement of toxic substances in such cases.
There are basic financial requirement qualifications for an FHA loan that apply for all borrowers in terms of FICO scores, compensating factors for marginal credit, employment and income verification, etc. But not all applicants may have same types of income, jobs, etc.. For example, applicants who are seasonal workers, earn commission income, work for themselves, etc. may be asked to produce additional tax documentation and profit-and-loss statements for those who own their own businesses.
Various Types of FHA Mortgages
If you are interested in acquiring a mortgage loan through the FHA, there are some important facts you should know. The FHA has a wide variety of loans from which you can choose. The FHA allows you to borrow money from a lender, provided your mortgage is insured from default for the first five years. Once your home's equity is of a certain percentage, you will no longer be required to have mortgage insurance; your monthly payments will decrease as a result. However, your monthly mortgage payment is dependent on which type of mortgage you choose. FHA Loan allows you to choose from many different types of mortgages depending on your specific circumstances and needs that are backed by HUD.
Adjustable Rate Mortgage (ARM)
The FHA adjustable rate mortgage is a HUD mortgage specifically designed for low and moderate-income families who are trying to make the transition into home ownership.
Balloon Mortgages are when a borrower makes smaller payments at the beginning of the mortgage and then pays off the entirety of the loan at a later date. This is good for people who know they will have a large sum of money in the future, or for people who need a lower payment now but expect to make more money in the future.
Relocation Mortgages are available for people who need a loan to relocate to a new home while their existing home is for sale.
Bridge Mortgages are similar to relocation mortgages; you can purchase a new home prior to the sale of your existing home. You will have a larger mortgage payment because you will pay for both homes until the existing home sells. However, if there is a home you want to purchase immediately and you are afraid that it will sell while you wait for your existing home to sell, then you can purchase the home with a bridge loan.
Hybrid Mortgages are similar to adjustable rate mortgages, but the fixed-rate time period is usually longer. For example, a hybrid mortgage may have a fixed interest rate for the first ten years and then the interest rate will increase. Hybrid mortgages are good for people who plan to spend many years in their home but know that they will eventually move into a new home.
FHA Secure Refinance Loan
Many homeowners with adjustable rate mortgages find themselves in financial trouble because of current interest rate increases. FHA Secure refinancing can help when foreclosure is a threat.
FHA Reverse Mortgage
An FHA reverse mortgage is designed for homeowners age 62 and older. It allows the borrower to convert equity in the home into income or a line of credit.
Energy Efficient Mortgage
The FHA Energy Efficient Mortgage program helps current or potential homeowners significantly lower their monthly utility bills and incorporate the cost of energy efficient improvements into their mortgages.
Graduated Payment Mortgage
Graduated Payment Mortgages are FHA loans for home buyers who currently have low to moderate incomes but expect them to increase substantially over the next 5 to 10 years.
FHA Loans for Condominiums
FHA condominium loans, sometimes called condo loans, are specifically designed toward those who purchase housing units in a condominium building.