Government Financing Programs

Question 1

National Housing Act of 1934

Answer 1

-Introduced fully amortized loans & low down payments.
-Created Federal Housing Administration (FHA).
Purpose= Make home loans more affordable & accessible to buyers.
-Encourage home ownership & stimulate the economy.

Question 2

FHA

Answer 2

• Federal Housing Administration (FHA).
• Purpose= Make home loans more affordable & accessible to buyers.
• Encourage home ownership & stimulate the economy.

Question 3

What do FHA loans require?

Answer 3

These loans will require an appraisal and an inspection.

Question 4

How does FHA work?

Answer 4

• FHA insures the riskiest part of the loan.

- Qualified lenders are then willing to make loans for borrowers with less >80% LTV.

Question 5

LTV

Answer 5

Loan to value

Question 6

What is the minimum down down payment needed for an FHA loan?

Answer 6

3.5%

Question 7

What is the riskiest part of the FHA loan?

Answer 7

The 16.5%.

Desired % down (20%) - the FHA down payment requirement (3.5%)=16.5 (the riskiest part of the loan

Question 8

Who insures the riskiest part of the loan in the event of a foreclosure?

Answer 8

FHA-Banks are only willing to lend in an FHA loan because the FHA insures it.

Question 9

Who pays for mortgage insurance (MI) or private mortgage insurance (PMI)?

Answer 9

The buyer-it is rolled into their monthly payment.

Question 10

What is the difference between MI & PMI?

Answer 10

MI (mortgage insurance):
-Payments remain for the life of the loan. Can never be removed.
-Homeowner would either need to sell or refinance to get out of MI.
PMI (private mortgage insurance):
-Is automatically discharged at 78% LTV.

Question 11

What are the three types of FHA loans?

Answer 11

203(b): 1-4 Family
234(c): Condo
203(k): Rehab

Question 12

How do loan limits and caps on purchases vary?

Answer 12

By state to state.

Check on HUD site for detailed information.

Question 13

FHA loans are for

Answer 13

Primary residence only.

• Occupied for the majority of the year.
• Can establish residency after 1 yr. under FHA guidelines.

Question 14

Benefits of the FHA loans?

Answer 14

• Low down payment.
• Easier to qualify (allow higher DTI ratio, lower FICO scores, etc.
• Competitive interest rates (rates are market driven).
• No prepayment penalties.

Question 15

Who is eligible to use an FHA loan?

Answer 15

Anyone purchasing a property as their primary residence.

Question 16

FHA approval process….

Answer 16

• Is similar to conventional.

- Based on buyer’s income, credit, down payment, & appraisal.

Question 17

FHA does what?

Answer 17

• Insures loans, not makes them.

- FHA does not set rates either, rates are market driven.

Question 18

Which FHA loans are assumable?

Answer 18

• FHA loans originated prior to 1989 are assumable.

- Cannot have a “due on sale” clause.

Question 19

These loans will require appraisal and inspection.

Answer 19

• Veteran Affairs (VA) financing.
• Federal
• Established in 1944 as part of the GI bill.
• Similar to FHA, except there is no down payment requirement.
• There is a funding fee (can be rolled into the loan).
• For honorable discharged veterans & active duty members.

Question 20

What are the benefits to a VA loan?

Answer 20

• No down payment requirement.
• Low or no FICO score.
• No mortgage insurance premium.

Question 21

Which VA loans are assumable?

Answer 21

• VA loans originated prior to 1988 are assumable.

- Cannot have a “due on sale” clause.

Question 22

USDA financing

Answer 22

• United States Department of Agriculture Financing.
• Loans, grants, & other financial programs for low/middle-income Americans.
• For purchasing homes or farmlands in rural areas.
• Offers renovation funds so owners can bring up to code in rural areas.

Question 23

USDA multi-family housing program

Answer 23

• Rental housing to very low, low to moderate income households.
• Additional programs for elderly housing & those w/ disabilities.

Question 24

Farm service agency

Answer 24

• Type of USDA financing.

- Provides loans to new farmers/ranchers who typically wouldn’t qualify.