FHA LOANS

FHA was created by the Federal Government to provide affordable housing financing for qualified borrowers. FHA insures 100% of the loan, eliminating the lender's risk. The borrower pays an upfront insurance premium which is approximately 1.5% of the loan amount. This money can be financed directly in the loan amount. The borrower also pays a monthly premium of .5% of the loan amount divided by 12 months. FHA requires down payment of 3%. This money can be a gift. No reserves are required. Closing costs can be financed in the loan amount. Borrowers must provide proof of sufficient income to show ability to pay the mortgage. FHA guidelines are more relaxed, such as; a bankruptcy that was discharged at least 2 years ago, the use of alternative credit (utilities, cable TV, auto or medical insurance premiums, child care, school tuition, furniture or appliance store accounts) in lieu of traditional credit, and higher debt to income ratios. FHA interest rates are extremely competitive with conventional rates. requires primary mortgage insurance, which can be paid monthly. The borrower must have 5% of his/her own funds for the down payment and 2 months reserves on deposit. Closing costs must be paid by the borrower. Requirements of a conventional loan applicant include excellent credit, job stability with sufficient income, a sizable down payment, and low debt to income ratios. Borrowers who meet Fannie Mae guidelines are rewarded with an interest rate only slightly lower than an FHA interest rate.