| Is FHA Financing a good choice? Yes or else it would | | | | an FHA interest rate. |
| not have been used by 30 million people. Is | | | | Credit Issues |
| Conventional Financing bad? No. It is just a matter of | | | | Credit issues affect many people and if you have |
| which service suits your requirements the best. | | | | ever been faced with bankruptcy or foreclosure then |
| Good, Better, Best | | | | the FHA option is your best bet when looking for a |
| FHA loans are offered by thousands of lenders and | | | | mortgage. FHA is more relaxed and lenient toward |
| are readily available nationwide and because they all | | | | your application. The criterion is that if you have been |
| offer identical terms and services, it is worth your while | | | | subject to bankruptcy, it must have been a year |
| to shop around to get the best possible rates when | | | | previously to the load application under Chapter 13 |
| you either finance for the first time or refinance. | | | | Bankruptcy or two years under Chapter 7 Bankruptcy. |
| Simple and Basic | | | | Conventional Finance institutions may not even look at |
| FHA Financing is a basic mortgage program | | | | you under these circumstances. |
| implemented by the Federal Government in the1930s | | | | Leniency and Understanding |
| with the objective of offering affordable mortgage | | | | FHA qualifying criteria are that you have permanent |
| loan to people who either have had credit problems in | | | | employment and can prove you are able to cover |
| the past, are first time home buyers, or have low or | | | | your monthly repayments. They also require you |
| moderate incomes. | | | | produce some sort of credit history, and if you do not |
| It has expanded in popularity and is today a choice | | | | have what is called traditional credit, you can use items |
| worth considering by any borrower. FHA Financing has | | | | like utility payments, past rental records, insurance |
| no hidden fees or high increases that may result in | | | | policies or any other report from approved credit |
| foreclosure down the road. The borrower gets both | | | | providers. |
| financial security and peace of mind. | | | | FHA has unusually liberal standards for qualifying and |
| Rates, Deposits and Payments | | | | may allow you to borrow a lot more than conventional |
| FHA rates are lower than Conventional rates and you | | | | loan companies. With FHA programs, as much as 43% |
| are not subjected to pre-payment fees. You can get | | | | of your monthly income can be allocated to recurring |
| fixed-rates with FHA which has a big impact on your | | | | monthly costs like mortgage payments and vehicles |
| monthly re-payments and because your monthly | | | | payments. If you quality, FHA can provide you with |
| repayments are set, you can budget long term. You | | | | 100% of the loan. As the borrower, you are liable for |
| do not need exorbitant deposits, 3% of the loan | | | | the initial insurance premiums which comes to about |
| amount will do it. Other financial institutions insist | | | | 1.5% of the loan amount, but this amount can be |
| borrowers prove cash reserves when they close the | | | | absorbed into the loan if need be. Your repayments |
| deal and this means that beside the deposit you get | | | | will be 0.5% of the total loan amount divided into 12 |
| heaps of money in savings, something not attainable | | | | months, and a 3% deposit is required, however no |
| by the majority. FHA does not ask for reserves. | | | | reservations are needed and it can take the form of a |
| On top of this, FHA allows owners to provide anything | | | | gift, but cannot be absorbed in the loan amount. Closing |
| up to a 6% cap of the sale price. This can be in the | | | | costs are your liability, but can also be funded in the |
| form of what is called ‘seller contributions.’ In the | | | | loan amount. |
| event of a market being slow, or where sellers use | | | | Conventional institutions stipulate the borrower have |
| their rights to move homes, seller contribution credits | | | | 5% for the deposit as well as 2 months reserves in |
| secured by the owners, can be put toward paying the | | | | the bank and will not fund closing costs in the loan |
| buyers closing costs. | | | | amount. |
| Except for the deposit, this may even cover all of the | | | | Citizenship |
| buyer’s closing costs. A word of caution though, | | | | You do not have to be a citizen to quality for an FHA |
| contributions by the seller must be attained in writing | | | | loan. You can be either a permanent or a |
| and must be part of the purchase agreement which is | | | | non-permanent resident. If you are a permanent |
| inspected by the provider of the loan. Borrowers must | | | | resident, you need to prove this via documentation |
| provide sufficient proof of income to demonstrate the | | | | supplied by the Bureau of Citizenship and Immigration |
| ability to pay the mortgage. | | | | Services (BCIS) who are part of Homeland Security. |
| Requirements of a conventional loan applicant include | | | | In the case of non-residency, you need to prove that |
| excellent credit, job stability with sufficient income, a | | | | you can legally work in the country and to do this you |
| sizable down payment, and low debt to income ratios. | | | | will need to produce your Employment Authorization |
| Borrowers who meet Fannie Mae guidelines are | | | | Document issued by the BCIS. |
| rewarded with an interest rate only slightly lower than | | | | |