| You see, previously, FHA loans in the Knoxville and | | | | have been satisfied. Also, there is no income limitation. |
| surrounding area were limited to $200,160 for the note | | | | You can make as much money as you want and still |
| amount. If you wanted to buy a $210,000 home, you | | | | qualify for the program. And the monthly mortgage |
| had to pay the difference out of your own pocket. | | | | insurance that is required is at a reduced rate. An |
| The new increase limit allows for a note amount of | | | | upfront mortgage insurance premium is collected, but |
| $271,050. That's a remarkable leap. And that big jump | | | | it's financed into the loan amount. The loans can only |
| means the FHA umbrella has widened. Again, great | | | | be for your primary residence, and you can get |
| news. | | | | adjustable rate mortgages or buy downs (money |
| What's so fabulous about FHA? First and foremost, a | | | | collected upfront to make your payment less for the |
| FHA loan only requires a 3% contribution out of pocket | | | | next year or so-usually seller paid) if you want, too. |
| from the buyer. And, FHA allows the seller to pay up | | | | What else? No need to worry about a pre-payment |
| to 6% of closing costs and pre-paid costs ("pre-paid | | | | penalty. They don't apply to an FHA loan. |
| costs" are the money held in reserves to pay for your | | | | I've personally seen a huge increase for my customers |
| taxes, insurance and per diem interest). Look at it this | | | | in FHA loans lately. Where they previously may have |
| way. If you wanted to buy a $250,000 home now, you | | | | qualified for conventional financing, they now prefer the |
| would only need to have $7500 into the deal if you | | | | FHA program. It better suits their goals and they qualify |
| could negotiate with the seller to pay the remainder of | | | | more easily for the program if they have minor credit |
| the closing costs and pre-paid items. On this particular | | | | challenges. Oftentimes, they are denied a conventional |
| example, that would mean the seller could pay up to | | | | loan but obtain FHA underwriting approval. |
| $15,000 in closing costs for you. In reality, the closing | | | | The new FHA loan limit should help many people in |
| costs/pre-paids would be more around $5,000-6,000, | | | | months to come. Also, look for the conventional |
| but you get the picture. It's a very affordable program. | | | | conforming limit take a higher jump (it's currently at |
| The other highlights of FHA? Flexibility from an | | | | $417K). That move will also allow more flexibility for |
| underwriting stand point. Credit scores can be as low | | | | purchasing and refinancing homes. I'll write about that |
| as 560 (with proper documentation) and medical | | | | later. But right now, the FHA has raised the roof, so |
| collections accounts are ok. Judgments do have to | | | | take advantage of it! |