Your Guide to FHA Home Loans
By Jim Pate
The Federal Housing Administration (FHA) is a division of the Department of Housing and Urban Development (HUD), which insures loans. FHA mortgage insurance encourages lenders to make loans to otherwise credit worthy borrowers, which may not be able to meet conventional underwriting guidelines.
There are a wide variety of FHA insured loan programs, from fixed rate mortgage to adjustable rate mortgages, hybrid ARMs, reverse mortgages and more.
FHA 203 (B) Program
The standard run-of-the-mill FHA home loan is called an FHA 203 (b) and is the most common FHA insured loan funded today. It is a loan used to purchase or refinance a 1-4 family structure.
FHA Streamline Refinance
The FHA streamline refinance permits borrowers with a current FHA insured loan to refinance without income, employment, asset and credit score verification. No appraisal is required. The new
loan must result in a minimum of a 5% reduction in mortgage payment when replacing a fixed loan with a fixed loan. No minimum payment reduction is required when converting an ARM to a fixed.
FHA 203 (H) Program
The FHA 203 (h) program allows the FHA to insure loans made to victims of major disasters, who have lost their homes and are in the process of rebuilding or buying another home.
FHA 203 (K) Rehab Program
The FHA 203 (k) is a purchase or refinance loan program, with a rehabilitation component to repair or modernize a one-to-four unity subject property. For less extensive repairs, borrowers may
take advantage of a Limited 203 (k). The value is determined one of two ways; current value plus costs of rehab or 110 percent of the appraised value after rehab, whichever is less. The value must
remain below the FHA mortgage limit for the area. Proposed rehab must exceed $5,000.
Types of improvements, which can be made as part of a 203 (k) loan:
• structural alterations and reconstruction
• modernization and improvements to the home
• elimination of health and safety hazards
• changes that improve appearance and eliminate obsolescence
• reconditioning or replacing plumbing; installing a well and/or septic system
• adding or replacing roofing, gutters, and downspouts
• adding or replacing floors and/ or floor treatments
• major landscape work
• enhancing accessibility for a disabled person
• making energy conservation improvements
FHA 251 FHA ARM
This FHA program specifically relates to adjustable rate mortgages (ARMs). This program is set up to be relatively stable, in relation to other ARMs. A typical ARM may be tied to the LIBOR and be a 2/1/6 ARM, which means that the rate may adjust by as much as 2 points at the initial adjustment period and 1 point for subsequent adjustments, with a lifetime cap of 6 points. The FHA 251 is tied to the 1-year Treasury Constant Maturities Index and is a 1/5 ARM, which means that the rate adjustment is capped at 1 point annually and 5 points over the life of the loan.
FHA Hybrid ARMS
A Hybrid ARM is an adjustable rate mortgage with an initial fixed period of typically 3 years, 5 years, 7 years and 10 years. After the fixed period, the loan converts to an adjustable rate mortgage for the remainder of the term.
FHA 234 (C) FHA Condominium Loan
This is just the program name when a condominium is being used as the security interest on an FHA insured loan. FHA requires condominium complexes to be approved prior to insuring.
FHA 245 (A) Graduated Payment Mortgage
This program was established to help home buyers with limited income, but who expect their income to rise over time. Essentially, the mortgage payments start small and increase gradually to help the borrower grow equity at an accelerated rate.
FHA Energy Efficient Mortgage (EEM)
The FHA EEM helps families save money on their utilities by enabling them to finance energy efficient improvements with their FHA insured mortgage. The belief is that an energy efficient home will have lower energy costs, making it more affordable for the homeowners. With lower utility bills, the borrower can expect an increase in cash flow to apply toward the mortgage payment.
FHA Reverse Mortgage
The basics of a reverse mortgage or a HECM (Home Equity Conversion Mortgage) are as follows:
• all borrowers/on title must be 62 or older
• may need as much as 50% equity at start
• no mortgage payments due
• taxes and insurance must be paid
• may receive lump sum, annuity payments and/or have a credit line
• can never owe more than home is worth
Secure One Captial
At Secure One Capital, our motto is “Better Rates, Better Service, a Better Mortgage Experience.” We will work with you to find the right loan program for your mortgage needs. Then we will work to secure the best interest rate available to you.
To learn more about what Secure One Capital can do for you, call today at 877-304-0764 and speak with one of our friendly mortgage bankers or you can apply online. For best results, choose the complete application.
We look forward to serving you.