FHA Description
Published November 7, 2007 by Shane CookFHA allows for both first time homebuyers and homebuyers that have already purchased a home. They just have to be occupying the new property as a primary residence. They can own other properties and still do an FHA loan. The only time the FHA loan gets difficult is if they already have an FHA loan on another property. In that scenario there is a different set of rules we would have to go by.
There is not a limit on how long they have to hold the property before they sell it (in other words there is no pre-payment penalty.) Basically to qualify for FHA you need a 585 score or higher , 3% down (can be gift from a family member). Debt to income ratios of 55% or less, and be buying a property that is within the loan amount range FHA will allow for a specific county. FHA is really designed for clients with so so credit (585 to 660), or someone that needs a cosigner (FHA does not put restrictions on cosigners like most other loans do), or someone with no credit score (FHA allows for alternative credit, this means we collect utility bills, insurance bills, etc, for the past few years and establish a credit score for them, and as long as these items were paid on time, they could do an FHA loan.)
FHA does have monthly mortgage insurance, and you have what is called an upfront mortgage insurance premium that is 1.5% of the loan amount. This is the fee FHA charges to do the loan (in addition to other closing costs, origination fees, etc.) This funding fee is added to the loan amount so the borrower does not have to pay it out of pocket at closing. FHA rates are very similar to conventional loan rates and today we could do 6.375% with no points, and no origination fee or 6.125% with a 1% origination fee today for a 30 day closing. When we do an FHA loan we have to have an FHA appraisal done, which is completed by a certified FHA appraiser. Many of the appraisers on the Outer Banks are certified to do FHA, and the turn around time is roughly the same as normal appraisals. When you write an FHA contract there is an addendum that FHA requires to be in the contract, and signed the same date as the rest of the contract. This addendum is called “For your protection get a a home inspection. This addendum is in your Realtor docs, or I can get you a copy if you need it.
Shane Cook
Senior Mortgage Specialist
First Horizon Home Loans
(Office) 800-256-7887
(Cell) 252-207-2665
(Fax) 866-669-5871
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