FHA Loans are the most popular loan product on the market right now for many people. There are several things about the program that make it flexible for people to qualify. I thought this information might be helpful to those who have questions about FHA financing. Below are some of the important things to know about FHA. if you have any questions please send me an email or give me a call.
Bolded words are important things to know. Blue font are examples on the information I provided.
- FHA Loan Limits in Maricopa County are $346,250 through 2008.
- Currently FHA only requires 3% down payment on purchases. This is suppose to go up to 3.5% at the beginning of 2009.
- Seller can contribute up to 6% of the purchase price towards your closing costs. Example: Family gift funds for down payment or DAPS and seller paying closing costs can make it possible to purchase a home with no money out of your pocket. An FHA buyer is not required to have any money in their accounts for approval providing the other money comes from the sources stated above.
- FHA allows to refinance and take cash out for home improvements or consolidate debt up to 95% value of your home.
- Down payment money can be gifted from family. NOTE: if you will be receiving gifts funds from family it is important to try and have the gift funds in your account from family before applying for a mortgage. less paper work if you do it that way. Also be sure to make a copy of the check for the gift funds. There are also several Down Payment Assistance (DAPS) programs available. Ask me about them.
- Interest rates have ranged from 5.5% - 6.5% during the year of 2008 for the most part.
- 5/1 ARM, 15 year fixed, and 30 year fixed are the most popular terms.
- FHA charges a 1 time UP FRONT MORTGAGE INSURANCE PREMIUM that you should be aware of. This up front premium is changing to a flat 1.75% on October 1st, 2008. The fee is 1.75% of the loan amount and can be rolled into the loan amount so it doesn't have to come out of your pocket. This fee is not a Wells Fargo Fee. it is an FHA fee to provide insurance for the loan if it goes into default. Example: $150,000 loan amount X 1.75% equals $2,625 fee and can be added to the loan amount for a final loan amount of $152,625. it can also be paid by the seller providing that is how your negotiate your deal.
- All FHA loans have Monthly Mortgage Insurance added to the monthly payment. This is important to know for FHA. The calculation is .50% or .55% depending on credit score. Example: $150,000 loan amount X .50% = $750 annually divided by 12 = $62.50 monthly and added to your payment. $200,000 loan amount would be $84 per month. This mortgage insurance cannot removed until 5 years. After 5 years if the home has 20% equity it can be removed by having Wells Fargo do an appraisal. It is now TAX DEDUCTIBLE ! Always confirm with C.P.A.
- This program can be done with little or no credit history. It allows for alternative credit sources such as 12-24 months of cell phone payments, auto insurance, utility bills, ect.
- You don't have to be a 1st time home buyer to do FHA. You can have 1 FHA at a time for a primary residence only. There is this myth that it is only for 1st time home buyers and that is not correct.
- FHA is also a great program for less than perfect credit. They like to see that there has been no derogatory credit in the past 12-24 months. So if you had bad credit it is very important to pay off any collections and try to have no late payments in the last 12-24 months and to establish as much good credit as possible 12-24 months from the past bad credit. if you have questions about credit please give me a call. if you have had any late payments since then letters of explanation can help in getting the loan approved still.
- Lastly, please refer back to the $7,500 TAX CREDIT I posted that explains how you can receive a $7,500 check back when filing taxes for purchasing your first home.
Thank you for reading!
Phil White 480-430-3080
