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FHA Loans Boost Home Buying Power for Borrowers

Posted in: FHA / VA Loans
By Taylor Mortgage Group

FHA loans are appreciated by home buyers for many reasons.

FHA home loans consolidate the cost of mortgage insurance into the home loan, increasing the premium approximately 1.75%, as an upfront fee with and additional monthly fee of 1.5%.  This adds a small amount to the monthly mortgage payment.  Note that the use of the term "FHA loan" is a misnomer.  The Federal Housing Administration serving under the Department of Housing & Urban Development insures home loans.  It does not issue the loan or guarantee the loan.  Therefore, the FHA insurance-backed home loan minimizes the default risk for lenders.  That is especially important when borrowers submit less than 20 percent down payments.

The FHA loan product is most often used by first-time home buyers and low to moderate income buyers.  FHA approved lenders are authorized to assist home buyers by taking loan applications processing loan applications, and underwriting loans, and closing loans.

How do home buyers benefit from FHA home loans?  The Federal Housing Administration or FHA-backed mortgage allows home buyers imperfect credit histories and low down payments.  By insuring the transactions, the FHA's loan products boost competitive interest rates and loan terms.  They also demand fewer home repairs. 

How to Find Out if You Qualify for a VA Loan

One popular Colorado home loan is available from the Veterans Administration or VA.  Present and past military on active duty service and reservists are eligible for the VA loan package.  The Veterans Administration loan program requires eligible applicants to qualify.

Below are the basic eligibility requirements for VA loans.  The applicant must accrue one of the following terms of service with the United States military and have received an honorable discharge, if applicable:

·         90 days or more active-duty service during wartime

·         181 days or more of active-duty service during peace time

·         Surviving spouse of a veteran who died during service or because of service related injuries

·         Reservist deployed for 90 days or more in a combat zone

·         Reservist with six years of service

Qualifications

Qualify for a VA loan parallels the traditional loan process.  Applicants need to obtain a Certificate of Eligibility from the Veterans Administration or the VA Loan Specialist to begin the process.

Oftentimes, veterans choose to mortgage their homes with VA loans to leverage their accumulated service to the country.  A VA approved lender will facilitate the process.  Other variables considered during the qualification process include credit, employment, income, and bankruptcy. 

Most lenders require applicants to maintain a minimum credit score of 580.  Credit history, especially during the past year, is heavily weighted.  Late payments and new credit applications need to be kept at a minimum.  Applicants must wait two years after a Chapter 7 Bankruptcy and one year after a Chapter 13 Bankruptcy.

The Veterans Administration prefers borrowers who are employed with a steady income for two consecutive years.  With documentation to support a good explanation, in some circumstances they will allow for a shorter employment term period.  The applicant must prove enough income to make monthly mortgage payments, monthly expenses, and have discretionary income left over for miscellaneous expenses and emergencies.

 Circumstances and situations may differ from the general overview presented here.  We highly recommend speaking with a VA Approved Home Loan provider for expert advice.

Low down payment:  FHA rules as of January 1, 2009 allow borrowers to put down as low as 3.5 percent and to finance 96.5 percent of the purchase price of a home.

FHA Loan limits are high:  Home buyers may use FHA loans to mortgage homes costing up to 115 percent of local median prices.  The FHA mortgage limits change periodically.  On January 1, 2009, the FHA maximum conforming loan limit changed to $417,000 for single family homes; loan limits may not exceed $625,500 in any area.  There are no income limits.  

FHA and credit background:  An FHA loan mitigates many financial problems.  Applicants may have lower FICO scores than they are allowed with a conventional loan.  To obtain FHA loans after bankruptcy, the applicant must wait 2 to 3 years and maintain good credit.  To obtain FHA loans after foreclosures, the applicant must wait 2 to 3 years and maintain excellent credit.  In addition, FHA allows higher debt ratios than the limits imposed for conventional loans.

Reasonable FHA repair demands
:   In the past several years the FHA has loosened its requirement for home repairs.  For example older roofs do not need to be replaced unless they leak; however, defective roofs that leak need to be replaced before closing.  Windows that stick do not need to be replaced.
FHA loans offer competitive rates and terms:  Interest rates for FHA loans vary within 0.125 percent of conventional loan.

Anyone may apply for an FHA loan.  Please contact Taylor Mortgage Group for assistance.  For information about creative solutions for rural loans used to develop housing, businesses, industries, and cooperatives, please visit www.creativemortgagefunding.com or call Taylor Mortgage Group LLC at (303) 339-5950 or (303) 884-9393.

 

   

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Taylor Mortgage Group, LLC

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303-884-9393
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720-306-3813

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CO  License:  100013875
NMLS: 385946
Regulated by the Colorado Dept. of Regulatory Agency



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