I asked one of our in house mortgage guys Brian Cumpton at RWF Mortgage (a joint venture of Rubloff and Wells-Fargo) to explain FHA financing to my readers. Brian can be reached at firstname.lastname@example.org. Since he sits near my office and is bugging me all the time, I figured I'd put him to work for you. Here's his concise description of the FHA loan option:
As the market keeps changing, we are constantly challenged with buyers obtaining financing. FHA (Federal Housing Administrator) is a government insured financing, financed by Local and National Lenders, that allows home buyers to purchase a 2 Flat for little down in today’s market. The financing is not provided by the government, as the Government only insures the Financings. Today, 11% of all Home Financing is secured by FHA Programs.
There are many advantages of FHA Financing over Conventional Financing. Conventional Financing is the financing typically regulated by the Fannie Mae and Freddie Mac Association, while being insured by Private/Public Companies. With FHA, this program is regulated by FHA & HUD and is insured by the Government. Their mission is: To increase homeownership, support community development and increase access to affordable housing free from discrimination. FHA is the oldest program created by Congress back in 1934.
Some of the advantages of FHA Financing over other conventional financing are as follows.
- 3.5% down payment required towards the purchase price or closing cost
- The Down payment can come from a Gift from a relative
- The seller of the property can give up to a 6% credit to the buyer towards closing cost, prepaid items, association dues, or taxes
- A Non Occupying Borrower can be on the Financing to help Qualify (Parents, relatives, etc…)
- Rental Income for additional Unit/Units is used in qualifying the buyer – which will offset the monthly payment
- No minimum Credit Score required
- No past history of credit required – only 1 source of a 12 month payment history
- The Loan is Assumable by a new buyer – therefore they can assume the current terms of the mortgage at the time of assumption.
- No Income restrictions – you can have as much or as little income as long as the buyer qualifies
- Not limited to a 1st Time Home Buyer – you can be a 5th time buyer and use the program
- 2 years from the Discharge on Bankruptcy’s – Conventional financing requires 4 years
- 3 years from the Discharge of a Foreclosure – Conventional Financing requires 4 years.
- There is no Geographic restriction on where you can buy
- Fixed & Adjustable Rate Programs
- Interest Rates are not set by your Credit Score – unlike Conventional Financing, the Interest Rate is the same for everyone regardless of Credit Score.
My associate at Rubloff, Connie Engle also wrote a good post about FHA financing from an agent's perspective at our Rubloff Luxury blog
I know its a plug for our blog http://www.guidemehome2chicagoluxury.com but they are doing a good job, I enjoy reading it and I should have some contributions on the site soon... as soon as I write something professional enough!