The Washington Post explains:

“The major force behind assumptions is the ability of buyers to get financing at an interest rate lower than that currently charged by lenders. If the home seller has a mortgage with a rate below the market rate, having the buyer assume the seller’s loan can be better for both. The buyer enjoys a lower rate and avoids the settlement costs on a new mortgage.”

FHA mortgages are just about the only type of home loans that are assumable these days. They also offer lower interest rates and more generous qualifying requirements than conventional loans.

See Also:

FHA Mortgage Guide

• Beginning in the spring, borrowers will be charged an upfront fee of 2.25 percent for mortgage insurance, instead of 1.75 percent.
• The FHA will ask Congress for permission to raise the about they charge annually for mortgage insurance.
• FHA mortgage applicants with credit scores below 580 will be required to make a down payment of at least 10% of the home’s purchase price. Previously, most borrowers were allowed to make down payments as low as 3.5%
• Sellers may only make closing cost “concessions” of 3% instead of 6%.

The new FHA regulations will make buying a home more difficult for some borrowers. But, they are still able to offer the most lenient terms available in the recession housing market.

photo credit: TheTruthAbout…

See Also:

FHA Basics

The Calgary Herald reports:

“All borrowers will have to demonstrate that they could make the payments on a five-year, fixed-rate mortgage — even if they end up choosing a mortgage such as a variable-rate mortgage, that would result in a smaller payment.

And anyone who wants a government-insured mortgage to buy a home in which they will not live will have to come up with a minimum down payment of 20 per cent, up from five per cent.”

Wow, those are some tough new rules! The American-based FHA is expected to tighten their mortgage requirements as well. If the changes are this stringent, you can bet that a lot more borrowers will be looking for creative financing solutions. photo credit: ★Debs★

See Also:

FHA Loans

However, the FHA 203(k) has quite a bit of paperwork and many professionals believe that too many borrowers get fed up before the process is over.

Boston Real Estate Now puts it this way:

“FHA loans take even more time, the underwriting seems endless, and the paperwork could kill a forest. The consensus is this advice: if you are going to apply for a 203K loan, find a lender who does them on a regular basis. Like all FHA products, the process is different and it takes some experience to know where the traps are. If you barrel in without proper guidance, you will end up stuck for weeks, waiting for the next list of paperwork the underwriter asks for.”

As with all creative financing techniques, choosing someone who has experience in the area can save you a lot of time and trouble.

See Also:

FHA Mortgage Guide

FHA 203(b) Loans

The growth of FHA mortgages has resulted in fraud and what some call “inappropriate lending practices.” Basically, a lot of new customers are not making more than a single mortgage payment. They take out the FHA loan and never pay their mortgage bills, forcing the lender to go through a time-consuming and costly foreclosure process. These early defaults are putting the FHA program in a bad light and causing some nay-sayers to urge tighter lending standards.

The Washington Post explains:

“Once again, thousands of borrowers are getting loans they do not stand a chance of repaying. Only now, unlike in the subprime meltdown, Congress would have to bail out the lenders if the FHA cannot make good on guarantees from its existing reserves. And those once-robust reserves are showing signs of stress, raising the possibility that taxpayers may have to pick up the tab for the first time since the agency was established in 1934.

More than 9,200 of the loans insured by the FHA in the past two years have gone into default after no or only one payment, according to the Post analysis. The pace of these instant defaults has tripled in one year. By last fall, more than two dozen FHA home loans on average were defaulting this way every day, seven days a week.”

I’m not against policies to prevent fraud, but if the FHA program sets tighter standards, we all suffer. Unfortunately, these FHA loans are the only option for thousands of financially stable borrowers. Traditional banks just aren’t providing the kind of creative financing mortgages your responsible, everyday family needs. If the FHA low down payment program ceases to exist, the mortgage crisis will only get worse.

See Also:

FHA Mortgage Guide

Answers to Common FHA Questions

According to a letter from this governmental organization, the lower floor on FHA loans (borrowers in lower-cost areas are able to take out a mortgage for up to this amount) are as follows:

One-Unit $729,750
Two-Unit $934,200
Three-Unit $1,129,250
Four-Unit $1,403,400

The ceiling on FHA mortgages for higher-cost areas has been raised in areas such as Los Angeles County, New York county, Salt Lake county, and DC. These limits are as follows:

One-Unit $271,050
Two-Unit $347,000
Three-Unit $419,400
Four-Unit$521,250

This is good news for credit worthy borrowers who can’t qualify for traditional loans because they don’t have a 20% down payment. FHA-insured mortgages allow borrowers to make a down payment as low as 3.5% and issuers are often able to overlook credit report flaws.

To find the FHA loan limit in your area, take a look at the HUD FHA Mortgage Limit Website.

See Also:

FHA Mortgage Guide

Answers to Common FHA Loan Questions

The FHA (Federal Housing Authority) is a government agency designed to help citizens purchase their own homes. While they do not give loans directly, they do insure loans from traditional lenders. Most major banks and mortgage brokers can help you take out an FHA loan.

The down payment on an FHA mortgage can be as low as 3.5% – in today’s market that’s outrageously low. Generally, FHA loans have rates comparable to other mortgages, and their fees are often lower. However, borrowers must pay monthly mortgage insurance fees.

More info on FHA loans can be found here:

Answers to Common FHA Mortgage Questions

FHA Mortgage Guide

FHA Loans Step-by-Step

Inman News reports:

“The House version of the bill would restore the upper limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs to $729,750 in high-cost housing markets, where they stood for much of 2008 before being reduced to $625,500 — a step endorsed by many real estate industry groups.”

There’s no guarantee that this provision will appear in the final legislation. But, if it does, homeowners living in higher cost of living areas (such as Los Angeles, San Francisco, and New York) will have the ability to buy more expensive properties with the benefits of an FHA loan. In most areas throughout the country, $729,750 would get you a pretty amazing mansion. But, in big cities like those listed previously, homeowners pay about that much for a nice, 3br/2ba home in a good neighborhood.

FHA-insured loans allow homeowners to buy with a low down payment (3%) and minimal closing costs.

photo credit: ktylerconk

See Also:

FHA Loan Basics

FHA Loans Step-by-Step

I once walked through a home where the previous owner had recently been evicted. It was clear that he left unhappily, and probably against his will. Junk was piled everywhere, major appliances were missing, and windows were covered over with saran wrap. The carpets were soiled, the hardwood was scratched up, and I could barely breath because of the smell. Many lenders wouldn’t dream of issuing a loan for a home in that condition.

This is where an FHA mortgage can come in handy. They have a special lending product, called the HUD 203(k) loan that allows borrowers to include the cost of repair projects in the mortgage. The loan amount is actually based on the estimated value of the home after the renovations are completed.

The FHA only insures these loans, they do not offer them. So, it’s possible to take out an FHA mortgage from just about any major borrower. If you find yourself looking at run-down foreclosure properties, this may be one of your best options.

photo credit: TheTruthAbout…

See Also:

FHA Mortgage Guide

HUD 203(k) Mortgages

But, these days are over.

Now, lenders want to make sure that a borrower has some stake in the property. Without putting a down payment on the table, it’s easier for a borrower to let the home slip into foreclosure. Basically, the homeowner feels that there’s not much to lose.

It’s practically impossible to find a no down payment mortgage in today’s market, but many homeowners are still able to take out FHA mortgages with only 3% down. That’s much more affordable than the 20% generally required for traditional loans. FHA (the Federal Housing Administration) is a government organization designed to help Americans own their own homes. They’re more flexible about qualifications, although borrowers still have to prove a lot more now than they did a few years ago.

To learn more see: FHA Mortgage Guide.