The truth about FHA mortgages

Most consumers have the misconception or believe falsely that FHA mortgages are for first time home owners, when in fact, this is not the case. An FHA loan can be obtained whether or not it is the first time buying a home or your tenth time buying a home. One of the most important qualifications for obtaining an FHA loan is that the property must be your primary residence. Also, in most cases , you are only permitted to have one(1) FHA loan at a time. There are a few reasons why you could have a second(2nd) FHA loan, but it is extremely rare. For example, If your job moves you and you already have an FHA loan on you current primary residence, in some cases, FHA will allow a 2nd FHA loan to assist in the financing of a new home.

An FHA loan can be obtained on the following types of properties, a 1-4 unit residential property, An FHA Approved Condo( ). A Manufactured Home( must meet certain restrictions) and lastly, a mixed use property, An example of a mixed use property is a structure that has a retail store(or 2) and up to 2 apartments. The general rule is that the residential part must be at least 51% of the total square feet.

The minimum down payment on a FHA loan is 3.5% of the purchase price of the property. Funds for down payment can come in the form of a gift from a family member, a Grant from any source as long as repayment is not required, or the prospective borrowers own funds. Sourcing and seasoning of funds for the last 60 days is required. A sellers concession of up to 6% of the purchase price is allowed on FHA loans.

The most common FHA loan is a 30 year fixed loan and will require a monthly Mortgage Insurance Premium(MIP), regardless of the Loan to Value(LTV). Other FHA loans include a 15 year fixed, 1 Year ARM, 3 year ARM, 5 year ARM, a 2/1 Buy down, as well as a 203k loan and a 203k streamline loan.

An Amendatory clause is required on FHA loans, which allows the buyer to renegotiate or cancel the sales contract if the property does not appraise for the purchase price. This clause tends to scare many sellers and realtors into putting in such language on a listing to discourage a buyer who is planning on obtaining FHA financing. In some cases, sellers will refuse an offer that is submitted with a buyer that plans on using FHA financing.

An FHA appraisal must be done by an approved appraiser on the FHA approved list.

It is important to understand what your options are on FHA loans. First, an upfront mortgage insurance premium of 1.75% of the loan amount is required up front, but, it can be financed into the loan. A monthly mortgage insurance premium equal to 1.35% of the loan amount is also required, but can be removed once the Loan to Value reaches 78% of the original principle balance.

It is very important to be able to deal with a knowledgable, licensed mortgage professional when shopping or researching any type of mortgage, but particularly when shopping for an FHA loan.

Lastly, FHA loan amounts are determined by the county the property is being financed in. For example, In Broward, Palm Beach and Dade counties , the FHA loan limit for a one(1) family is $345,000. The FHA Loan limit for a two(2) family is $441,650, the FHA loan limit for a three(3) family is $533,850 and the FHA loan limit for a four(4) family is $663,450.

As previously mentioned, dealing with a licensed mortgage professional is highly recommended.

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