FHA LOANS Flashcards
- The Federal Housing Administration (FHA) is a
government agency within the Department of Housing and Urban Development (HUD).
- The FHA provides 100% insurance to
its approved lenders.
(The lenders recover any losses experienced during a foreclosure or short sale because the FHA makes up the difference to the lenders.)
- FHA loans have a required
Up Front Mortgage Insurance Premium (UFMIP) and a Monthly Insurance Premium (MIP) regardless of the down payment amount.
- The lenders set the interest rate, not FHA or HUD
- The lenders set the interest rate, not FHA or HUD
- FHA loans are
assumable; there is no due-on-sale clause
- FHA loans have a
4% late fee of the P & I only.
- FHA borrowers must have a
valid Social Security number.
- FHA borrowers must be eligible to
work in the United States
- FHA loans have a minimum
down payment of 3.5% with a credit score of 580 or above. This can be a gift from a relative.
- On a FHA Loan, if credit score is between
500-579, the minimum down payment is 10%.
- FHA loans require
the use of an FHA-approved appraiser.
- An FHA Streamline Refinance doesn’t
require an appraisal, or income and credit verification
- In a FHA loan, Sellers may contribute up to\
6% of the lesser of the property’s sales price or the appraised value toward closing costs.
- In an FHA loan Initial premium—
upfront mortgage insurance premium (UFMIP)for a 15- and 30-year purchase and refinance transactions for cases assigned on orafter April 9, 2012 - 1.75% of the loan amount.
- Credit Score Requirement - borrowers with a minimum score of 580 or above are
eligible for maximum financing
- Credit Score Requirement - borrowers with a minimum score of 500 to 579 will be
eligible for a loan with up to 90% LTV
- Credit Score Requirement - borrowers with a minimum score under 500 are not
Are not eligible for FHA financing. The Upfront Mortgage Insurance Premium is charged on all FHA loans and paid to HUD after the loan closing.
- FHA requires
three (3) months ownership before resale
- FHA loans have a maximum loan amount in each county, which does not include
the Up-Front Mortgage Insurance Premium.
- Borrowers with FHA loans must:
Establish occupancy of the property as their principal residence within 60 days of signing a security instrument and live inthe house for at least one year
- FHA limits transactions as follows:•
Resales occurring 90 days or less following acquisition will not beeligible for an FHA mortgage.• Resales occurring 91 to 180 days following acquisition will be eligiblefor an FHA loan provided an additional independent appraisal isobtained• Resales occurring 90 days to one year following acquisition will besubject to additional review to establish value
- 203(b) Home Mortgages:
FHA’s primary program, 203(b) is a fixed-rate program used to purchase or refinance one-to-four-unit family dwellings.
- 234(c) Condominium Mortgages:
An FHA condo loan, also known as Section 234(c), is a mortgage insured by the FHA, which is designed to assist people who are getting a new condo
- 203(k) Rehab Mortgage:
Section 203(k) insurance enables homebuyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home.
- 251 Adjustable-Rate Mortgages:
The 251 program is based on 203(b), with the added feature of an adjustable rate. FHA offers several different types of ARMs, including one-, three-, five-, seven- and ten-year versions.
- Energy Efficient Mortgages:
These loans are allowed for improvements to existing and new construction properties to increase their energy efficiency. Financing is the greater of 5% of the loan or $4,000, with the maximum capped at $8,000.
- 245(a) Growing Equity Mortgages and 245 Graduated Payment Mortgages:\
Similar in structure, these programs are intended to assist borrowers by lowering the initial costs of their mortgage. Payments increase each year, so the programs are best for borrowers expecting a steady increase in their income over time.
- 2-1 Buy Downs:
FHA permits borrowers to buy down the rate on their fixed- rate loan. Lenders are required to qualify the borrower at the note rate and not the buydown rate. In this type of buy down, the borrower deposits funds in an escrow
account in order to offset lower interest.
- 203(g) Officer and Teacher Next Door: The 203(g) program is
intended to revitalize communities by offering homes for sale at a 50% discount off the HUD appraised value to teachers, law enforcement officers and firefighters/EMTs. HUD requires a mortgage agreement to be signed for the discounted amount although no payments or interest is charged as long as the borrower fulfills a three-year owner occupancy requirement
