getting declined

I Need a Loan but Keep Getting Declined: Here’s What You Should Do Next

Reasons your mortgage application was rejected

getting declinedNobody likes rejection because it hurts. A home loan application that has been denied is especially debilitating because it shutters one of the biggest dreams in life- home ownership. However, it shouldn’t be the end of the world when a lender rejects your application. There is always a second chance. Mortgage lenders are supposed to explain to unsuccessful loan applicants why their applications were declined. They normally give a free credit report that was used to make the decision. If you get such a copy, you should use it to address your weak areas and start working on them so you can be approved in your next application. The loan can be denied for reasons such as:

  • Missed debt payments
  • Too small a down payment
  • Poor credit history
  • Too low DTI
  • Lack of a savings account
  • Lack of proper income statements
  • Recent application of credit cards and other loans
  • Monetary gifts
  • Moving a huge sum of money
  • Over-drafting the checking account
  • Job inconsistency

Here are the right steps to take when you are denied a mortgage.

Make an appointment with the loan officer

If your lender doesn’t give reasons for your disapproval, you have the right to ask them what went wrong. It could be your income, small down payment, or credit issue. Ask the loan officer to point out the specific areas of concern. Perhaps you need to add a few thousand dollars to your down payment in which case you can save up and re-apply.

If your credit report had issues, your lender should provide the name of the agency used and a copy of your credit report. From there you should take the right steps to improve the credit score. If the application was brushed-off due to income inadequacy, consider other home financing options for borrowers in low-income classes. Different lenders provide different approval benchmarks and you should know your options before you try something. Don’t forget that you can always negotiate the terms and rates with your lender to reduce the loan amount.

Bottom line is being aware of the reason for your disapproval helps you to apply smartly next time. However, you shouldn’t apply for more than 5 home loans in a period of six months.

Consider a different type of mortgage

Consider a different type of mortgageThere are several types of mortgages which come with different sets of guidelines. The key is working with a mortgage consultant to find what mortgage fits your financial situation. If you are strapped for cash, a conventional mortgage is an ideal option for you because it requires only about 3% of security deposit. But you need a credit score above 620. If your credit score doesn’t allow, consider other options like FHA home loans which are not stringent on credit scores. You might even be approved with as low as 580 credit score and at least 10% down payment. Certain lenders are committed to assisting homebuyers to qualify for home loans regardless of their financial situations. So, when you don’t qualify for one type of home loan, ask the loan officer for an alternative option. If you don’t speak up, you might not be assisted.

Find another lender

Just because one lender denied you a loan is not to mean that the entire industry has turned you down. The mortgage lending sector is quite flexible. Banks normally check your prevailing debts and income to calculate the DTI and determine if you are an eligible borrower. In general terms, your DTI must not exceed 36%. There are banks that are very strict to DTI. If your debt burden exceeds 36% of your gross income, they cannot approve your loan application unless you pay off some debts. Nonetheless, other lenders are a bit lenient and can allow a DTI up to 45%. Therefore, when a big bank rejects your home loan due to a high DTI, don’t lose hope yet. Go to another lender like a credit union or the local community bank.

Work on your credit report

credit reportIf you are a first-time home loan applicant, you should know that checking your credit report before applying for a loan is mandatory. You can get it free of charge from one of the three credit reporting bureaus every year. Perhaps you did not bother to check your credit history before applying for the home loan and that is why you were turned down. It’s high time you review it and clean up the mess. It takes minor errors to pull down the credit rating thereby hampering your chances mortgage approval. Thus, you must dispute erroneous information on your credit report that is tarnishing your credit status. Even if the information was reported by mistake, your lender won’t care and will see you as a risky borrower until the issues are resolved. Removing those errors might take a few weeks. You might also want to pay off some debts to boost the credit score but it takes one to two months for that change to be reflected on the credit report. Because mortgage processes are time-conscious, enquire about rapid scoring to get the credit report updated quickly. With rapid scoring, your creditor can acknowledge the error. The good thing about rapid scoring is that the credit is updated within 3 days. The lender will verify the updated information forts and sent the right documents to a credit reporting bureau. The charges for such a service differ from one mortgage lender to the next.

Final word

Mortgage rejection can be a big shock but you shouldn’t take it lying down. One denial should not discourage you from becoming a homeowner. It only means that you are not a suitable candidate for a particular lender at that point in time. Just make sure you have gotten to the bottom of disapproval. Luckily, most lenders dint leave you guessing as they provide an explanation for the denial. Don’t fret because there are many ways to get approved as explained above and move on with home-buying. Check out how much mortgage you can afford.

FHA loan in oregon

FHA Loans in Oregon – Loan Limits and Requirements

FHA loan in oregonBuying a home can be confusing and scary process with an endless list of items to do. Of all the pieces that go into buying a home, none is quite like the mortgage. With a range of different mortgage options, it can be difficult to decide which option is best. One such option is the FHA loan, specifically the FHA loan in Oregon. While the FHA loan comes with its own list of things to keep in mind, in many cases it is the best choice for home buyers.

This article is intended as an overview for anyone considering taking on a FHA loan in Oregon. It will touch on the key points to understand when considering a FHA loan, as well as the pros and cons of taking one out, and the process that is involved in securing one.

Get pre-qualified for a FHA Loan in Oregon Today!

What is an Oregon FHA Loan?

A FHA loan in Oregon is a mortgage that is insured by the Federal Housing Administration (FHA). What separates this type of mortgage from a more traditional one is the lower down payment, along with less strict credit requirements. In many cases, the down payment required is only 3.5%, making it the perfect choice for those who don’t have the more standard 20%.

Different Types of FHA Loans in Oregon

types of fha loans in oregonDuring the course of shopping for loans several recurring terms will likely come up.

Fixed-Rate FHA Loan

A fixed rate mortgage is one where the interest rate does not fluctuate. It won’t get any lower, but it won’t go up. This means monthly payments will remain the same throughout the loan term, making it very easy to budget. This makes it an attractive choice for many borrowers.

30 Year FHA Loan

This is the most popular term for mortgages and FHA loans. A 30 year loan simply means that re-payment of this loan will take place over the next 30 years. Compared with another popular loan term of 15 years, a 30 year mortgage gives twice as much time to pay off. Keep in mind though that during those extra years the loan will incur additional interest charges making the total cost of the loan larger.

In addition to the above, there are other options that are available for FHA loans. These include ARM loans, hybrid, or a balloon mortgage.

Advantages of an FHA Loan in Oregon

fha advantages in oregonThe main benefits of the FHA loans are its low down payment and low, at least in comparison to other mortgages, credit requirements.

To start, banks are very motivated to approve these types of loans, which is evident in the fairly loose requirements. For people who may have been denied a mortgage loan in the past, have less than good credit, or lack a large down payment, an FHA loan in Oregon is an attractive choice. Due to the government backing and funding requirements, banks are much more likely to approve these types of loans.

The small down payment also makes them very attractive for first time home buyers. Traditional mortgages typically look for around 20% down payment, which can be difficult for many to come up with. This is especially the case for first time home buyers who lack any sort of home equity to negotiate with. FHA loans however, only need 3.5%! This allows a much wider range of people to apply for and be approved for this type of loan.

Disadvantages of an FHA Loan in Oregon

While there’s definitely some attractive positives to taking one, FHA loans do have some cons to keep in mind when considering getting one. This is mainly in the form of additional fees owed to secure the loan. At the beginning of the loan term there is an upfront funding fee of, at the time of writing, 1.75% of the total value of the loan. This amount can be working into closing costs however.

In addition to the upfront fee, there is also an annual fee broken into 12 monthly payments. This mortgage insurance is required to be carried for the lifetime of the loan. This too is calculated as a percentage of the total loan amount.

What Properties Qualify?

oregon fha loans property qualify

Not all properties are eligible for a FHA loan in Oregon, and there are additionally some requirements all properties need to meet. To start, FHA loans are primarily intended for those who intended to occupy the property in question. Therefore, they typically cannot be used for things like vacation, rental, or investment properties.

There’s also minimum property standards that need to be met before the loan is approved. Some items that a property will look for are:

● Asbestos
● Contaminated Soil
● Roofing expected to last for 2+ more years
● Located in an area of excessive noise
● Working bathroom with sink, toilet, and shower
● Structural soundness

This is just a short list of some of the items an inspector will look for. The housing department has put together a full list that goes into more depth on what disqualifies a property. If any issues are found, they will have to be fixed before the loan will be approved.

FHA Loan Limits Oregon

Another caveat of FHA loans is the limits imposed on how much can be borrowed. Each year, the max borrow amount is adjusted based on media home prices. This amount also varied for different residence types, and how many families are occupying a dwelling. A two family, duplex style home has a higher allowance than a single family home. Most buyers however, fall into the “One-Family” designation.

Currently, the range for “One-Family” dwellings ranges from roughly 275-408k. These values are based on county, so where a house is located can drastically affect the loan amount available. As noted above, this range is subject to change, so potential buyers should check the FHA website to get an updated look at the limits.

Credit Score

As with any type of loan, credit score is a major consideration when looking to get a FHA mortgage. For the standard 3.5% down payment, a credit score of 580+ is required. Those below this are not automatically disqualified, although additional conditions may apply.

The primary way to get one with a lower credit score is to offer a higher down payment. Typically, for those < 580, a down payment of 10% is required to offset the additional risk. They may also be subject to higher interest rates. They can also attempt to use alternative credit such as utility bills to prove credit worthiness. This is at the discretion of the lender however, so plan to call ahead.

FHA loan Requirements in Oregon

FHA loan Requirements in OregonWhile easier to get from a credit perspective, there are a number of additional FHA loan requirements in Oregon for securing a FHA loan. Some of these are unique to this type of loan, and may not be required for a traditional mortgage. Here is the list of requirements for those taking out a FHA loan:

● 3.5% down payment (potentially more for bad credit borrowers)
● Credit rating of 580+ (may be lower in certain cases)
● Steady employment history, usually at least 2 years
● Must be for a primary residence
● Property must be appraised and assessed by a licensed inspector

In addition, borrowers are also required to have debt to income ratios in an acceptable range. For front-end this is less than 31%, and back-end less than 41%. Finally, any bankruptcies or foreclosures should be 2-3 years in the past. In the time since, the borrower should have attempted re-established their credit.

How Do You Apply?

The first step to applying for any type of loan is to get your numbers in order. Make sure that your credit score is in the expected range and come up with budget estimates that keep your debt to income ratios acceptable.

Once all that is in order the next step is to find a lender that is approved to give out FHA backed loans. The FHA website has a handy tool for finding FHA lenders in Oregon that are approved. It does pay to shop around a bit as not all lenders will offer the same interest rates.

Once you’ve determined a reputable lender, you’ll be required to submit various documents that will verify things like employment, income, and credit. These documents include:

● W-2 from the last two years
● Tax documents
● Bank statements
● Proof of income
● Address of past residences
● Information on past employers

This information is then used to determine if you are eligible for a FHA loan in Oregon. Once you’ve gone through the approval process you’ll need to have the home inspected as mentioned above. This inspection must be ordered by the lender, and the inspection must pass, or issues must be fixed, in order to secure the loan.

What Are The FHA Loan Rates In Oregon?

The interest rates for FHA loans can change daily, so check with a lender to determine the current rate being charged. FHA lenders in Oregon do have the ability to charge their own rates, so it’s very likely that two lenders for the same loan will have different interest rates. In fact, many times the rate is up for negotiation, so don’t be afraid to ask your lender to go lower on the rate or match a competitor.

Rate Lock

fha loan in oregon rate lockOnce a lender has committed to writing a loan, they’ll provide the borrower with what is know as a rate lock. This will usually last from 30-45 days, but can last longer at the discretion of the lender. A rate lock simply locks in the interest rate at its current value and prevents it from moving with the market. Many lenders will also allow borrowers to pay to extend the length of the rate lock.

Keep in mind though, rate lock is a double edged sword. While it will keep your interest rate from getting any higher, it will also keep if from going lower.

Apply for your FHA Loan in Oregon Today!

FHA Loan in Oregon FAQs

1. Do You Have To Be a First Time Home Buyer To Qualify?

No, FHA loans are open to anyone who meets the requirements. Weighting the pros and cons can help you decided whether to go with FHA loan or a traditional mortgage.

2.What Is The Maximum Income Limit for FHA Loans?

There is no maximum income, if you meet the requirements you are eligible to apply for a FHA loan in Oregon. Keep in mind though, for higher income families that a traditional mortgage is likely to be cheaper over the life of the loan if they can supply a larger down payment.

3.Can you Refinance a FHA Loan?

Yes you can refinance into another FHA loan (called a streamline refinance) or into a traditional loan. Both options have their own set of pros and cons, so it’s important to understand each before making a decision.

Mortgages are one of the most confusing parts of buying a home, but hopefully this article has helped you decide whether a FHA loan in Oregon is the right choice. While certainly attractive on the surface, there are pros and cons to consider before diving in. Making sure you understand the full process is the best step to take to get the best deal when buying a new home!

fha title 1 loan

FHA Title 1 Loans

fha title 1 loan

The FHA Title 1 loan provides an easy way for homeowners to finance home improvements without having to have large amounts of equity built up in their home.

When looking to make repairs on a home, many homeowners are forced to take out loans in order to cover the costs of the repairs.

While many use the equity in their home to secure the loan, many homeowners lack the ability to do so. For homeowners in this position the FHA title 1 loan is an excellent option.

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FHA Title 1 Loans For Home Renovations

A title 1 FHA loan is a loan that is offered by the FHA for the purpose of home renovations.

What makes the Title 1 Loan different from other home improvement type loans is the ability to secure one without any equity.

This makes it available for a wide range of homeowners to use to improve their home.

No Equity? A FHA Title 1 Loan May Be the Answer!

who are fha title 1 loans forTitle 1 loans are for those looking to make necessary home improvements, who can’t secure a traditional home equity loan due to lack of equity in their home.

One key here to remember is that the title 1 FHA home improvement loan can only be used for improvements that directly impact the livability or functionality of a home.

That includes things like a new roof or replacing a furnace, but not something like installing a swimming pool.

Items deemed as “luxury” improvements can not use the Title 1 loan to finance their construction.

For those that are looking to many an approved improvement the Title 1 loan is a fantastic option. Due to needing no equity in the home, even recent home purchases can qualify for the loan.

FHA Title 1 Loans Provide Lenders With Security

Lenders are happy to work with Title 1 loans as they provide additional security for the lender.

The big reason is that they are covered by mandatory mortgage insurance of $1 per $100 of the loan or 1%.

This gives them additional security in the case of a default. In addition to that, larger amounts are also secured by collateral in the home.

Applying for a Title 1 Home Loan

applying for a title 1 home loanMuch like the standard FHA home loan, the title 1 loan is not directly provided by the FHA but by approved 3rd party lenders.

In order to secure a FHA, a prospective borrower needs to approach one of these lenders, which the FHA has a list of on their website.

It’s important to note that because it is provided by a 3rd party lender, each one may have their own terms and conditions.

This includes things like credit and income requirements, as well as interest rates and repayment terms. It pays to shop around a bit, and see which lender can provide the best deal.

It also means that time to get approved can vary by lender. Depending on the requirements and process, it may take a lender more time to review and make a decision on an application.

FHA Title I Loan Requirements

fha title 1 loan requirementsMuch like the typical FHA loan, title ones loans have a variety of requirements governing their usage.

Understanding these requirements is essential to determining whether a title one loan is the right choice.

As with any loan, the first thing a lender will check is your credit and income.

To start, FHA Title 1 loan credit requirements can vary by lender, but a higher score is always better.

There are no set minimums for credit score for a title one loan, so even low credit borrowers can be approved.

Lenders however are likely to offer better rates to those who have higher rates, but having a low credit score won’t automatically exclude a borrower from the program.

After that the lender will check income to make sure that a borrower can afford to make payments.

Many lenders will require proof of income in the form of pay-stubs, bank statements, or W-2’s. These all help to prove income, and show the lender that they are likely to get their money back.

They are also looking for a debt to income ratio of less than 45%.

Lastly, there are also requirements for what the loan can be used for.

In general, only repairs that improve the livability and functionality of the home can financed through this type of lien.

This means improvements such as a new roof or other ones that fall into a similar vein of improvement are acceptable.

It can’t be used for any sort of luxury improvements like adding a hot tub.

The loan must also be used on a property that has been occupied for at least the last 90 days.

FHA Title 1 Loan Limits

As with most loans, there are limits to what can be borrowed. Any amounts over these limits need to separately financed, or made up for by the borrower.

For single family dwellings, the limit is $25,000. Multi family dwellings are bit different, and come with a limit of $12,000 per unit, up to a maximum of $60,000.

In terms of repayment, single and multi family homes offer loans of up to 20 years. There is no repayment for early repayment either!

It’s also important to know that loans under $7,500 also don’t require any sort of collateral. This means that if a borrower defaults on the loan, the lender won’t be able to go after the home. However, for loans above the $7,500 mark, the loan is secured by the collateral of the house. In cases like this, the bank can foreclose on a house where the payments are not being made.

FHA 1 Title Loan Limits

Alternative Home Improvement Programs

The title 1 Loan program is not the only option homeowners have when looking to make improvements on their home.

What’s fantastic for homeowners is some of these programs can be used in conjunction in order to increase the amount a borrower can potentially use for their home improvement project.

FHA Title 1 Vs. FHA Title 2 Loans

title 1 vs title 2 loansTitle 2 loans are a group of home loans that allow borrowers to roll the costs of improvement and labor in the mortgage for a home.

Unlike a Title 1 which focuses on the improvement of an existing property, Title 2 loans can also be used for new purchases and fixer-upper type properties. Certain ones can also be used on an existing property to improve or fix issues.

This gives them a much larger range options and a higher amount that can be borrowed.

To offset this, they generally have stricter requirements for who can be approved for one, as well as other requirements such as minimum down payments and property inspections that must be met.

FHA Title 1 Vs. FHA 203K Loans

title 1 vs 203k loansAnother option for homebuyers and owners is the 203(k) loan. This type of loan is meant to aid in major property renovations, and can be taken pre-purchase for a fixer-upper or for improvements on an existing property.

The big difference on this loan when compared to the title one is the much larger amount that can be borrowed as it can be used to buy and fix up an entirely new home.

In addition to that, it can also be used with a Title 1 loan in order to further increase borrowing power.

The downsides of a 203K loan come with stricter requirements in terms of credit, as well as long approval process.

A 203K loan actually requires a contractor to submit a bid for larger projects before it can be approved, which can greatly slow down the process. It also requires a down payment of 3.5% for good credit borrowers.

Conclusion

For those looking to make improvements to their home the FHA Title 1 Loan is a great option. It provides an excellent way for those without much equity to secure funding for their project, and without a lot of the red tape of other home improvement loans.

FHA Title 1 Loan FAQs

Can I use a Title 1 loan to put in a swimming pool?

No, the title 1 loan cannot be used for luxury items such as a swimming pool. It can be only used to improvement of functional and structural components of a home such as fixing damaged siding or repairing/replacing a roof.

Can I use a Title 1 loan to install solar panels?

Some energy saving improvements such as solar panels can qualify for a title 1 loan. For those that don’t, the FHA offers a separate PowerSaver program specifically for this purpose. Keep in mind though, this program has different requirements from the title 1, such as minimum credit score of 660, so not all borrowers will qualify.

Does a Title 1 Loan require mortgage insurance?

Yes, title 1 loans require mortgage insurance that is an annual premium of $1 per $100 of loan. This helps to offset the risk for lender and helps ensure they are able to recoup their money in case of a default or non-paying borrower.

What Is The Maximum I can Borrow For a Title 1 Loan?

The maximum amount that can be borrowed depends on the type of house the improvements are going to be performed on. For single family dwellings the maximum is $25,000. For multi-family dwellings, this maximum is increased to $12,000 per unit with a cap at $60,000.

Additional Resources

  • FHA Home Loans
  • Should An FHA Mortgage Be Your Home-Buying Option?
FHA approved condos

FHA Approved Condos

FHA approved condosMany homeowners love the idea of having a maintenance-free property with all of the amenities found in an apartment complex.

Condominiums are an excellent way to combine the best of both worlds, but can you buy a condo with an FHA loan? You can definitely take advantage of all the benefits of this loan and purchase an approved condo all at the same time.

The trick is knowing exactly how to find these properties and learning which ones are FHA approved condos.

Get Pre Qualified for FHA Condos Today – Click Here.

The FHA loan program is sponsored by the Federal Housing Administration in conjunction with private lenders.

The federal government offers to back a certain portion of every mortgage to grant more peace of mind to lenders who might issue financing to first-time home buyers, people with poor credit, or those with no credit at all.

This opens the door for many people to purchase a property even if they aren’t ideal candidates for a conventional loan.

This program comes with lots of benefits for prospective buyers. Most notably, you have a much lower down payment compared to the typical twenty percent requested with a conventional loan.

If you have a credit score of 580 or higher, you could qualify for a down payment of just 3.5 percent.

All of this makes it more likely than ever that you could purchase one of the many FHA approved condos for sale. You only have to know where to look to find a property that meets the requirements.

What are FHA Approved Condos?

FHA approved condos saleNot all condominiums and complexes will qualify for the FHA loan. This is sometimes where home buyers become caught up with the financing because they fall in love with an area that isn’t already approved.

Familiarize yourself with the eligibility requirements and where you can go to find FHA approved condos for sale before you get started.

Eligibility Requirements

There are some very specific criteria for a complex to qualify as FHA approved condos. Many of these standards are put in place to protect the buyer from purchasing a home in a complex that might not bode well for the resale value of the property.

Home buyers should desire to stay within the boundaries of these eligibility requirements in order to protect their own financial interests in the years ahead.

Here are a few of the eligibility requirements you can expect to face when searching for FHA approved condos for sale:

  • Must contain at least two units
  • Detached or semi-detached units
  • Can be row houses or manufactured homes
  • May be walk-ups, mid-rises, or high-rises
  • May or may not have an elevator

Project Eligibility Requirements

Beyond these basic requirements, you might also find eligibility criteria that are a little stricter and apply to the project or complex itself. Some of the additional criteria here include:

  • Property must be primarily residential with more than 50 percent being used as homes
  • Owner-occupants must own at least 50 percent of the properties
  • No more than 15 percent of the units can be behind on their payments for more than sixty days
  • No more than 50 percent of the units can have FHA loans in one complex

In addition to the rules about ownership and residency for each unit, the complex must also abide by certain rules.

For example, they must have at least ten percent of their budgeted income in a reserve account in order to cover insurance deductibles and repairs or replacements for the coming two years.

All complexes must also have the appropriate type of insurance, including blanket, general liability, and a fidelity bond. Flood insurance might also be required depending on the location.

Leasing is another issue that will come up when searching for FHA approved condos. The HOA at the complex must allow you to lease the unit if you choose to, and you must be allowed to select any tenant you would like.

You should be able to lease the property whenever you choose to without any residency requirements on the property first. They may not allow leases for less than thirty-day periods.

The Board of Directors at the HOA also cannot force you to run background checks, credit checks, or a screening process on a new tenant even though you may choose to do so on your own.

How Can I Find FHA Approved Condos?

HUD FHA approved condosIn order to find one of these FHA approved condos, you will need to either work with a real estate agent or search on the HUD website. A real estate agent should be familiar with the local condos in your area that qualify for FHA financing.

If you don’t want to do much of the work and research on your own, this is definitely a great way to find what you need.

Alternatively, you can use the HUD website to search for condos that bear the HUD FHA approved condos label. This site allows you to search for a specific project or simply to view all of the eligible properties in your area. You can filter by city, zip code, county, and more.

All you need to do is change the status to approved to fund the HUD FHA approved condos.

From here, you can click on the links to find more information on each complex and condo. All of the relevant communities will be directly at your fingertips.

FHA Approved Condo Advantages

Why would you want to opt for a condo instead of a typical single-family detached home? There are a lot of reasons why homeowners are more likely to choose this type of property for their long-term home. Here are a few of the most popular reasons you might consider purchasing an FHA approved condo:

  • No maintenance or repairs on the condo
  • No yard work
  • Predictable fees work easily into your budget
  • More affordable than many single-family homes
  • Amenities like a pool and a gym right on-site
  • Entertainment options
  • FHA Approved Condo Disadvantages

    You will have to weigh whether the advantages outweigh the disadvantages before you make the move. As in any type of home, you are bound to have a few things that you might not care for about the property.

    Condos tend to have more disadvantages than a single-family home because they do have a stricter HOA, but you aren’t responsible for the maintenance or repairs on your home. Because of this, some of the restrictions make complete sense.

    The primary disadvantage of choosing a condo is the additional fee you might experience. The cost of the amenities might add up, even if you don’t really use them.

    The association fees can even be high, contributing a much higher out of pocket cost each month even though your condo purchase was cheaper.

    Other disadvantages to choosing a condo include:

  • Less privacy
  • Repairs may not be made in a timely manner
  • Smaller square footages
  • Limited parking options
  • Pet restrictions
  • Are FHA Approved Condos for First Time Buyers?

    FHA approved condos first time home buyersFHA approved condos are ideal for first-time buyers. The FHA mortgage program is ideal because it features low interest rates, looser credit requirements, and a much lower down payment than traditional options.

    When you combine those features with the low maintenance required for a condo and its low overall market value, you get a great combination that could be the perfect choice for a first-time home buyer.

    What are the Credit Guidelines for FHA Approved Condos?

    The FHA mortgage program does have some requirements that prospective borrowers will need to meet prior to receiving this loan. Your credit score is one of the most significant hurdles that many homeowners will have to deal with prior to getting financing for one of these FHA approved projects.

    There are two different minimum credit scores depending on how you hope to use this mortgage.

    Most individuals want to take advantage of the lowest possible down payment. With an FHA mortgage, you might face only a 3.5 percent down payment if you have a credit score of 580 or higher.

    Do you need bad credit home loans? You can still purchase a condo with the FHA mortgage program even if your credit score is lower than 580. Be prepared to put down a much larger down payment of ten percent if you have a credit score between 500 and 579.

    What is MIP?

    FHA approved condos mipAll FHA loans come standard with your mortgage insurance premium, often abbreviated as MIP. This monthly fee is very similar to PMI and it helps to protect the lender in the event that you default on the loan.

    Most conventional mortgages allow you to waive the mortgage insurance once you build up 20 percent equity in your property. However, this isn’t the case with the FHA loan.

    If you take advantage of the 3.5 percent down payment, you will have MIP for the entire duration of your loan. This is one of the major drawbacks to this type of loan because it can add up to thousands of dollars over the course of your loan term.

    Homeowners who put down at least ten percent of the value of the home have the option to remove their mortgage insurance premium after eleven years.

    This could be a major plus for families who have poor credit and need to place a higher down payment on the property.

    Keep in mind that you could put down a larger down payment to avoid some of the unnecessary cost of the MIP even if you don’t have poor credit right now.

    The cost of your MIP will vary from 0.80 percent of the loan value to 0.85 percent of the loan value.

    Frequently Asked Questions

    fha condos faqWhat are the FHA mortgage rates for condos?

    There are no set FHA mortgage rates for condos or any other type of property. The interest rates on this loan program will be set by the lender based on economic indicators, your credit score, the loan amount, and more. Be sure to check with your lender to view today’s FHA interest rates.

    Do condos qualify for FHA loans?

    Yes, some condo complexes do qualify for FHA loans. Be sure to check with your real estate agent or the HUD approved listings to determine whether a complex is considered to have FHA approved condos.

    How can I find FHA approved condos?

    You can find FHA approved condos by working with a real estate professional or searching on the HUD website here.

    Conclusion

    You can save a lot of money by purchasing one of these eligible FHA approved condos. It can cut back on the amount of maintenance you need to do and put far more amenities right at your fingertips.

    Don’t overlook all of the benefits and cost savings you could have from opting for an FHA loan on one of these easy-to-maintain properties instead of a single-family residence.

    FHA Approved Condos Additional Resources

    • FHA Streamline Refinance
    • FHA 203k Mortgage Guide
    north carolina fha loans

    FHA Loans North Carolina – Mortgage Information For Your NC FHA Loan

    Owning a home is often seen as the ultimate goal of the American dream. And it’s more than just a symbolic gesture – purchasing a home is a long-term investment, an asset whose value can appreciate over time. north carolina fha loansPlus, you have the security of owning your own property and the comfort of a large living space.

    But as we all know, owning a home is also not something to be done on a whim.

    It’s important to select the mortgage program that best fits your needs. Many North Carolinans are looking at Federal Housing Administration Loans, also known as FHA loans.

    Get Pre Qualified for An FHA Loan in North Carolina Today – Click Here.

    The FHA is the largest mortgage insurer in the world and roughly 30 percent of all home loans in Carolina are FHA mortgages.

    We’ve compiled a list of some of the most common questions about FHA loans and answered them – and if you’re from North Carolina yourself, maybe you’ll find that this type of mortgage is right for you.

    FHA Loans in North Carolina: What are the benefits?

    An FHA loan is a type of housing loan that is issued by a private bank or lender and insured by the United States Federal Housing Administration.

    In short, the FHA is promising that it will reimburse the moneylender if you can’t pay back your loan, a promise that is backed by the taxing power of the US treasury.

    Because they are guaranteed to make their money back, lenders who are partnered with the FHA are willing to make more substantial loans than they would otherwise – even occasionally granting mortgages in cases when they’d normally reject the application outright.

    For this reason, FHA loans mostly appeal to first-time home buyers, applicants with credit scores between 580 and 620, and buyers who want to make a low down-payment.

    What are the different types of FHA loans in North Carolina?

    types fha loans north carolinaHomeowners in North Carolina – as in other parts of the world – should educate themselves on the different types of available loans before choosing one that’s right for them.

    When most people talk about FHA mortgages, they’re talking about fixed-rate FHA loans.

    However, there are actually alternatives to this option, including:

  • A 5-year adjustable rate FHA loan in North Carolina. This is an option that is specifically designed for low or moderate income families who want to buy their first home.
    The 5-year adjustable rate mortgage starts at an interest rate that is 1 percent lower than a fixed rate FHA loan (in most cases), and that rate does not change for five years.

    This option gives the homeowners a chance to settle in before beginning to make larger payments.

  • A fixed rate FHA loan in North Carolina. This is the type of loan most home buyers will be familiar with.

    As the name implies, this option has a fixed interest rate that will not change for the duration of the mortgage – apart from slight deviations in insurance or property taxes, naturally.

    Your payment will be the same for every month of the payback period, which is most commonly 30 years.

    This loan is best for buyers who want a home but haven’t been able to save up money for the purchase, like college graduates or newlyweds.

  • An FHA condominium loan in North Carolina. This type of loan is specifically targeted towards buyers who are purchasing a condominium unit instead of a traditional house.

    This is often a popular choice with low and moderate income applicants.

  • What advantages do homeowners have with an FHA loan in North Carolina?

    fha loans advantages north carolinaAs mentioned in the introduction, FHA loans are among the most popular in the country and certainly in North Carolina. They come with a number of obvious advantages:

    Firstly, FHA loans have a much smaller down payment. Conventional mortgages usually require a down payment of twenty percent on a home. An FHA mortgage only requires a downpayment of 3.5 percent for most families.

    In North Carolina, they may even require no down payment at all!

    This is why these types of loans are often preferred by first-time homeowners, low income families, and younger prospective buyers – groups that have steady work, but which may not be able to afford a single large payment up front.

    Secondly, moneylenders and banks are much more flexible on the requirements for loan approval because the FHA loan protects them from risk and is backed by the United States government.

    An FHA loan in North Carolina requires no minimum income, a credit score of only 600 or more, and a much higher debt-to-income ratio than traditional mortgages (usually your payment needs to be no more than 31% of your income, but in some cases an applicant can get approved with a D-I ratio as high as 50%.)

    In many cases, applicants that would normally be turned down outright will get accepted for an FHA loan.

    In short, an FHA loan in North Carolina is much less expensive upfront and much more accessible than most other forms of mortgages. That said, be sure to pay attention to this next section:

    What are the disadvantages for an FHA loan?

    This section is why we’ve emphasized throughout this article how important it is to find the mortgage that works best for you.

    FHA loans offer many attractive advantages, but they come with disadvantages as well.

    Firstly, buyers are required to pay an upfront FHA funding fee which usually costs about 1.7 percent of the total mortgage.

    This fee is how the Federal Housing Administration protects its investment – it’s a premium for the insurance the government provides the moneylender.

    Secondly, there’s the issue of Private Mortgage Insurance, or PMI.

    Conventional mortgages usually let homeowners cancel their PMI after they have accrued a certain amount of equity (usually around 20 percent of the total value of the property.)

    With an FHA loan, you can’t cancel your insurance until you’ve paid off the home in its entirety.

    Thirdly, interest rates are often slightly higher for an FHA loan in North Carolina than they are on a traditional loan. This is how the banks make back their money from the small down payment up front.

    Finally, FHA loans may not provide enough funding if you need a larger loan. In North Carolina, the FHA maximum limit for 2018 is $300,150.

    How important is credit when applying for an FHA loan in North Carolina?

    fha loans north carolina importantOne of the major benefits of an FHA mortgage is the lower credit requirements, but let’s face it – credit matters any time you apply for any kind of loan.

    In North Carolina, most FHA Underwriters require a middle credit score of 620, and they will want to see three open trade lines on your credit report that have been there for a minimum of 12 months.

    However, this is not a hard and fast rule. It can be beneficial to “shop around” for lenders with lower credit requirements – in North Carolina, sometimes you can find as low as 580.

    Be aware: lower credit scores usually mean a higher down payment. Still lower than a conventional loan, but sometimes as high as 10 percent.

    In addition, some lenders in the state of North Carolina will now consider “additional forms of credit” in place of the typical FICO credit score. These can include long-standing accounts with vendors like your utility companies or phone service.

    What type of properties qualify for an FHA home loan?

    Not every property is available under FHA loan limits in North Carolina. Chapter 3 of the Department of Housing and Urban Development’s Handbook 4150.2 describes in 21 pages the exact requirements appraisers use to determine if a property is eligible.

    Mostly, these are safety standards – the government wants to make sure that the home is safe and secure (which is something you want to be sure of, too.)

    They will be looking for foundation issues, cracks, loose handrails, or other structural concerns.

    Homes are often disqualified if they have holes or leaks in the roof, low water pressure or temperature, insufficient space, or a faulty HVAC system.

    There are additional guidelines for condominium units which can be found at HUD.gov.

    Beyond these guidelines, the major qualifier for an FHA loan is the listing price, as laid out in the previous section.

    What are the requirements for an FHA loan in North Carolina?

    Typical requirements for an FHA loan in North Carolina in 2018 are as follows:
    fha loans north carolina requirements

  • A minimum credit score of 500 or two forms of alternative credit.
  • A property that has been appraised and meets the requirements of HUD Handbook 4150.2
  • A property that is worth less than $300,150
  • A debt-to-income ratio of 50 percent or less
  • Lenders can set their own standards for an FHA mortgage in North Carolina, but these are the minimum requirements set by the state and federal government.

    Most lenders will require a credit score closer to 600 and a debt-to-income ratio around 30-40 percent. However, it’s always worthwhile to “shop around” for a lender that can meet your needs.

    How do you receive an FHA loan in North Carolina?

    FHA loans are only insured by the government – they don’t originate any of the mortgages.

    Instead, the Federal Housing Administration will refer you to a list of lenders that they work with on these types or loans.

    Ask your local banks and mortgage companies – they will most likely have some kind of FHA loan program in place.

    Once you find a partnered lender with terms that you like, you will have to apply just as you do for any other loan.

    A representative will check your credit score, income, debt, and more to make sure you fit their requirements and the federal requirements listed above.

    What are the FHA loan rates for North Carolina?

    Not every lender will offer the same rates for an FHA loan in North Carolina. What’s more, the real estate market is in a constant state of flux and loan rates often change on a daily basis based on economic indicators.

    Shop around and do some research before applying to a specific lender to make sure they offer the lowest rates in your area – you don’t want your payments to become more than you can handle a few years down the road.

    Do you have to be a first-time home buyer for an FHA loan in North Carolina?

    This is a popular myth, but there’s no truth to it. Though FHA loans often appeal more to first-time home buyers than to other customers, anyone can apply as long as they meet the minimum requirements established by the federal government.

    What is the maximum income limit for FHA loans?

    There is no maximum income limit for FHA loan applicants in the state of North Carolina.

    Again, however, FHA loans are usually a better investment for those with a lower income because the main benefit of these loans is the lower down payment.

    If you can afford a larger payment up front a conventional mortgage will give you lower interest rates and you might pay less overall.

    Additional Resources

    • VA Loan in North Carolina – Loan Limits & Benefit Info
    fha loan limits

    2020 FHA County Limits

    When you sign up for a new mortgage under the Federal Housing Administration’s program, your loan will be subject to the FHA loan limits.

    These limits dictate the maximum amount that a person can borrow while still receiving the backing of the federal government. While some lenders might consider allowing borrowers to seek financing above these FHA loan limits, it puts lenders at a significantly greater risk.

    fha loan limitsThe FHA mortgage program is sponsored by the Federal Housing Administration to make homeownership more accessible to families who need a lower down payment.

    This agency works with private lenders to offer a sort of “insurance policy” in the event that a borrower defaults on their mortgage.

    In order to help them keep these guarantees under control, the FHA sets a maximum amount that they are willing to insure for the lender.

    Get Help Pre Qualifying for an FHA Home Loan – Click Here!

    How Do FHA County Loan Limits Work?

    The FHA loan limits are based on the county you live in and the type of home you purchase. Many of the 2020 FHA loan limits also account for the median price of similar real estate in your specific area. The difference in FHA loan limits should be good news for families who want to purchase a home in a more expensive area. This means that the ceiling, or the maximum amount that the FHA will insure, is going to be higher than it will be for lower-income areas.

    how do fha loan limits workThere are four distinct tiers that an area can fall into: the standard tier, the mid-range tier, the high-cost tier, and the special exception tier. Most properties and areas will be subject to the standard tier.

    These FHA loan limits don’t describe the maximum loan to value ratio. The loan limits simply state how much the federal government is willing to insure on your loan, meaning the amount you will be financing. You could still purchase a home that exceeds these county loan limits if you make a down payment for the remainder.

    Keep in mind that the county loan limits do not guarantee that you will receive lender approval for financing up to this amount. Your specific loan limit will be subject to borrower eligibility after the lender reviews key factors like your gross income, debt to income ratio, credit score, and more. The loan limits exist as a guideline for the maximum amount you could borrow, even though you might not be approved for this amount.

    How are the 2020 FHA Loan Limits are Established?

    The FHA county loan limits have increased for most of the country, effective in January 2020. As in most things, there is a specific formula used to determine what the loan limits will be in the various sections of the country. You can take a closer look at some of the math behind the 2020 FHA loan limits for each tier below.

    Keep in mind that there will be different FHA loan limits for properties that have multiple units. Homeowners are welcome to use this type of financing to purchase a single unit, like a detached single-family home or a condominium. However, they can also purchase properties that will be used to generate a monthly income as long as the owner plans to live in one of the properties.

    For example, you might be able to use the FHA mortgage to purchase a duplex or a triplex where at least one other unit would be rented out while you live in the other. You can use the FHA loan to purchase a maximum of four units on a single property, and they will be subject to additional guidelines and criteria before the financing can be approved.

    how are the 2018 fha loan limits are established

    Standard FHA County Loan Limits

    The standard limits apply to the majority of the nation, and they are perhaps the easiest standards to understand at a quick glance. The same loan limit will apply for every type of property from a 1-unit to a 4-unit home. Homeowners should expect to look for a home that costs $294,515 or less.

    How did this number come to be?

    The standard county loan limits are determined based on the “floor” calculation used by the government. They look at the conforming loan limit of $453,100 and take 65 percent of it for these FHA loans.

    The standard FHA county loan limits apply in cities that have a lower median home price. Experts calculate which areas should have this standard limit instead of the significantly higher limits from in the other tiers by multiplying the median home price by 115 percent. When the product is less than $294,515, the county falls into the standard tier.

    Mid-Range FHA County Loan Limits

    The mid-range 2020 FHA loan limits are a little more complicated to determine than the standard tier. These have a range from the standard loan limits of $294,515 to $679,650 for a single unit property. The rest of the ranges are as follows:

    • Two-unit property: $294,515 to $870,225
    • Three-unit property: $294,515 to $1,051,875
    • Four-unit property: $294,515 to $1,307,175

    You will find that this limit also has its own mathematical calculation that is based on the floor found in the standard tier and the ceiling found in the high-cost tier. These limits apply to areas where 115 percent of the median home price exceeds $294,515 but still comes in lower than $679,650. Whatever the product of this calculation is, that is the loan limit for that particular county.

    There are several of these areas around the nation, but they are not as common as the standard tier. However, you will notice that there are some variations due to the way this figure is calculated.

    High-Cost FHA County Loan Limits

    The high-cost FHA county loan limits are extremely rare to find. There are fewer than 100 of these across the entire country, with most of them being major cities such as the New York City metro area or Washington, D.C.

    The high-cost tier sets the “ceiling” for the FHA loan limits. These are the maximum amounts that the FHA is willing to insure for any area, and they tend to be fairly generous for these more expensive cities. Take a look at what you can expect from the maximums for the different unit sizes:

    • One-unit property: $679,650
    • Two-unit property: $870,225
    • Three-unit property: $1,051,875
    • Four-unit property: $1,307,175

    These areas are determined by a calculation similar to that for the floor. The ceiling is set by multiplying the conforming loan limit ($453,100) by 115 percent. This figure is used for areas where the median home price multiplied by 115 percent exceeds $679,650.

    Special Exceptions

    There is one final tier that is very rarely seen for FHA loans unless you live in Hawaii, Alaska, Guam, or the U.S. Virgin Islands. This last tier has significantly higher loan limits, as evidenced by the hard facts below:

    • One-unit property: $1,019,475
    • Two-unit property: $1,305,325
    • Three-unit property: $1,577,800
    • Four-unit property: $1,960,750

    The construction expenses for these areas are estimated to be much higher than they are in other parts of the country. These higher loan limits are designed to give homeowners a chance to still purchase a home despite the increased cost to build it.

    What are the FHA Streamline Refinance Loan Limits?

    what are the fha streamline refinance loan limitsThe FHA streamline refinance loans are not subject to the same loan limits as the purchase of a new property. However, you will have to bear in mind that these refinance loans are only available to homeowners who purchased a property using an FHA loan, to begin with. This means that your initial purchase of the property would have had to comply with the loan limits and standards in your area.

    If the value of your home has increased, this could be a great way to still take advantage of lower interest rates or to reduce the MIP on your mortgage without being subject to the FHA county loan limits.

    In order to refinance your current property, you need to:

    • Be current on your payments
    • Have no more than one late payment in the last year
    • Make at least six payments on the mortgage
    • Mortgage payment must reduce by a minimum of 5 percent

    All of these requirements must be met in order for the 2020 FHA loan limits not to apply and for their property to exceed the ceiling.

    Conclusion

    Understanding the FHA loan limits for 2020 makes you more apt to find a property that is better suited to your family’s unique needs. Knowing where the FHA county loan limits come from and how they apply to your area will give you the tools you need to have a talk with your lender about a specific property. Make sure you know what the county loan limits are in your area by searching the FHA website here.

    FHA Loan Limits Frequently Asked Questions

    Do FHA loan limits include down payment?

    No, the FHA loan limits dictate the maximum amount of financing they will insure for a private lender. Your down payment does not contribute toward this amount.

    What is the FHA maximum loan to value ratio?

    The maximum loan to value ratio (LTV) is 96.5 percent because it requires a minimum down payment of 3.5 percent.

    What is the FHA maximum loan amount with MIP?

    All FHA loans are subject to MIP. This means that the maximum loan amount with MIP will be the same as the 2020 FHA loan limits for your area.

    Does borrower eligibility effect FHA loan limits?

    Yes, borrower eligibility may determine the exact amount that your lender is willing to allow you to finance. The FHA loan limits are available to demonstrate the maximum amount you can borrow, but a lender may choose not to issue the full amount based on the borrower’s credit score, debt to income ratio, gross income, and other factors.

    Why are the FHA loan limits so low in my county?

    The FHA loan limits are based on the median home price in your area.

    Are FHA streamline refinance loans subject to loan limits?

    No, the streamline refinance loans are not subject to FHA loan limits.

    Additional FHA Loan Limits Resources

    FHA Mortgage Limits
    FHA Loan Requirements in 2018

    fha mortgage insurance

    FHA Mortgage Insurance

    fha mortgage insuranceMortgage insurance can be a necessary evil for home buyers who don’t have a substantial down payment for the new property. Even FHA loans require buyers to make these payments, but it can help to understand just where this money is going each month. FHA mortgage insurance is a necessary expenditure for those who want to use this program, so what exactly do these payments do?

    These monthly payments are a way to protect the lender in the event that you default on the loan. You pay a small fee each month which goes toward an insurance policy held by the lender or the investor in your loan. This provides them with some security if you ever stop making the payments on your home property. You might hear this referred to as PMI, which stands for private mortgage insurance. When it comes to FHA mortgage insurance, it’s referred to as MIP for your mortgage insurance premium.

    Is Mortgage Insurance Required?

    fha mortgage insurance requiredOn a conventional loan, most home buyers have to pay for mortgage insurance until they build up twenty percent equity in their new home. A home buyer who put down a smaller down payment could request for their mortgage insurance to be removed once they met this standard benchmark. It was only required for homeowners who had very little equity in their new home purchase.

    The FHA mortgage program is a little different, but it does still require mortgage insurance for a borrower who only places a small down payment on the property. One of the most advantageous features of the FHA loan is that it only requires a low down payment of 3.5 percent for most borrowers. This small down payment usually makes lenders a little wary of allowing you to forego mortgage insurance premiums though.

    Yes, you must make your mortgage insurance premiums for a period of time but they can be removed later on.

    How Does It Work?

    When you make your initial purchase of the home, your lender will factor the mortgage insurance payments into your estimated monthly costs. You will make this payment monthly until you can lower your overall loan-to-value ratio, sometimes referred to as LTV. This payment will hold until you invest enough into the property to raise your equity to an acceptable level.

    However, you will also have an upfront mortgage insurance premium that is due at the time of your closing. Borrowers do have the option to finance this amount into their overall loan if they choose not to pay it out of pocket.

    Your upfront mortgage insurance premium is equal to 1.75 percent of your loan amount. Keep this figure in mind because it can definitely change the overall price of the home you are intending to purchase, particularly if you must combine it with your monthly insurance payments. The monthly payments are usually calculated on an annual basis but are only paid monthly.

    How Much Does FHA Mortgage Insurance Cost?

    The upfront FHA mortgage insurance cost is always the same. This number can be much easier to calculate because it is equal to 1.75 percent of the principal balance on your loan. This is a one-time fee that can easily be rolled into your remaining loan balance.

    fha mortgage insurance costThe second FHA mortgage insurance premium is a little more difficult to calculate. This will depend on your loan amount, your down payment amount (loan to value ratio), and the length of your loan. For loans that fall into the conventional category at $625,500 or less, you can expect your annual insurance premiums to fall into one of these categories:

    • 30-year loan with less than 5% equity: 0.85%
    • 30-year loan with more than 5% equity: 0.80%
    • 15-year loan with less than 10% equity: 0.70%
    • 15-year loan with more than 10% equity: 0.45%

    These percentages will be applied to the total balance of your loan to come up with your annual total for mortgage insurance premiums. This figure can then be divided by twelve to determine how much you will owe on a monthly basis.

    As you can see, your mortgage insurance premiums will change as you build more equity in the home and decrease your principal balance. Make sure you are paying attention to the changes in your private mortgage insurance each year to prove that your rates are decreasing.

    What is MIP?

    what is mipThe MIP stands for “mortgage insurance premium.” This is a specific type of insurance policy utilized with FHA loans to help protect the lenders in the event that you default on the loan. Your upfront mortgage insurance premium can be bundled into your loan amount, while you might also be responsible for a monthly payment to keep this service active.

    The specific numbers will vary based on your loan amount, the duration of your loan, and the amount of equity you have built up in the property.

    After you maintain the home for a period of time and build up enough equity in the home, you can qualify to have the MIP dropped from your monthly expenditures. You will have to know the details of your loan in order to determine if you qualify to cut out this unnecessary fee each month.

    What is PMI?

    PMI and MIP both have a very similar sound when you’re trying to have a logical talk with your lender. You should really know how these two acronyms differ from one another before you make a commitment to any one type of loan product. What is the primary difference between private mortgage insurance and monthly insurance premiums?

    what is pmiPrivate mortgage insurance is issued on conventional loans to help protect lenders in case you choose to stop making the monthly payments on your mortgage. They tend to require this amount whenever you have a down payment that is less than twenty percent of the home’s total value. PMI serves as an insurance policy to give them some peace of mind about taking a risk on your financing, even though you did not come up with a large down payment.

    It is typically around 0.5 percent to 1.5 percent of the total loan value each year. This means that your PMI payments might change as you make more payments on your mortgage each year.

    PMI can be removed from the property once you build up at least twenty percent interest with a good payment history. Alternatively, it might be terminated as soon as your loan balance is scheduled to reach 78 percent of the value on the home.

    You might also be permitted to pay single premium PMI in one neat and tidy sum upon closing on your house. This lump sum payment could also be financed into the home’s loan value to avoid making monthly payments specifically for the PMI. This applies to the most common type of PMI, which is known as borrower-paid.

    You might also encounter lender-paid PMI which is factored into the interest rate of the loan. This fee will never go away or decrease until you are finished paying off the mortgage.

    On the other hand, the MIP is used specifically for FHA loans.

    How to Avoid PMI with FHA Loan

    Understanding the ins and outs of how to get around making your MIP payments with FHA loans can be extremely tricky. Some of the details pertaining to your MIP are affected by the date of your closing. Homes that received financing prior to July 3, 2013, might already be able to remove their monthly insurance premiums.

    how to avoid pmi with fha loanLoans made prior to July 3, 2013, must be paid down to a loan to value ratio of 78 percent or less. If your total is lower than this number and you have been paying for at least 11 years, you should be able to request for this monthly expense to be removed from your billing cycle. Alternatively, some lenders only require that you make these MIP payments for five full years if your loan falls into this category.

    An FHA loan that was issued after July 3, 2013, will not be able to drop their PMI unless you put down more than a ten percent down payment.

    This is the trick to avoiding a PMI payment with a brand-new FHA loan. You should plan to put down a ten percent down payment so that you automatically have more equity built up in the property. When this is the case, you can drop your PMI after eleven years instead of paying it for the duration of the loan.

    The ability to drop your mortgage insurance premiums can represent a huge savings for homeowners. They will be able to save thousands of dollars over the duration of their loan by selecting a much larger down payment right now. You will have to weigh whether this could be the best option for you, particularly if it requires you to wait a couple years to continue saving for the down payment on your property.

    How Do I Cancel FHA Mortgage Insurance?

    Getting rid of your mortgage insurance premium should be a major undertaking on every homeowner’s radar. Eliminating this monthly expense can save you a good bit of money each month, depending on your premium amount and the overall value of your home. It’s only natural to want more details on exactly how you can go about canceling your FHA mortgage insurance.

    how do i cancel fha mortgage insurance

    When Can I Cancel?

    If you purchased your home prior to July 3, 2013, the MIP will simply be removed from your loan once the loan to value ratio reaches 78 percent. This can take roughly eleven years if you placed a 3.5 percent down payment on the property unless you make extra payments to remove the MIP sooner.

    Homeowners who purchased their property after this magical date will have to take a slightly different approach to canceling their PMI, particularly if they only put down the minimum 3.5 percent down payment. You can choose to refinance your FHA mortgage into a different type of loan, such as a conventional loan product.

    How does this work?

    Well, the odds are that your home as gone up in value since the time you purchased it. Many homes have seen an increase as the real estate market started to rebound, even if they didn’t have any major updates in the last few years. The home you purchased for $150,000 years ago might now be worth closer to $200,000.

    This shows as accrued equity in the property when you attempt to refinance. The home is worth substantially more than what you originally paid for it. When you refinance it, you will need to plan to change your loan into something other than the same FHA financing program. Even though this would allow you to tap into the equity of your home, you will still be required to keep the PMI on the FHA financing whereas a conventional loan might not require it.

    The standards to refinance your home might be a little more stringent than those expected for a traditional FHA loan. You might need a much higher credit score in the average to good range (around 600) for a lender to feel comfortable refinancing your home. Consider where you might be at financially to determine if refinancing your FHA loan to remove PMI could be for you.

    Conclusion

    FHA mortgage insurance might be a necessary part of your loan structure, depending on when you purchased your property. Paying this fee every month can add up to thousands of dollars in wasted money for you as the homeowner. You can take a few creative routes to avoid making a PMI payment on the purchase of a new home. If you’ve owned your home for a while, you might need to talk to your lender about whether you can remove your mortgage insurance premiums.

    Frequently Asked Questions

    Will FHA mortgage insurance go down?

    Yes, FHA mortgage insurance will decrease in the total amount due as you pay down your principal balance on the mortgage.

    What does FHA mortgage insurance cover?

    FHA mortgage insurance covers your lender in the event that you were to default on your mortgage and the property would move into foreclosure. It is an insurance policy to help the lender recoup any lost funds from their initial investment.

    Why is FHA mortgage insurance required?

    FHA mortgage insurance is required to offer more protection to lenders in case you do not make the expected payments on your loan. This is done to help protect lenders who are issuing financing with lower down payments to homeowners who do not have equity in their properties.

    Does FHA mortgage insurance go away after a certain amount of time?

    FHA mortgage insurance can go away on loans that were issued before July 3, 2013, once the loan to value ratio becomes 78 percent or less. On homes that were purchased after this date, you can only get rid of MIP if you put down a ten percent down payment. If you had a lower down payment, you will have to pay FHA mortgage insurance for the duration of your financing.

    Why is my FHA mortgage insurance so high?

    Your FHA mortgage insurance is based on your down payment amount and loan type. It is calculated based on the value of the home. Here are the annual MIP rates for FHA mortgages of $625,000 or less:

    • 30-year fixed rate mortgage with less than 5% down payment: 0.85%
    • 30-year fixed rate mortgage with more than 5% down payment: 0.80%
    • 15-year fixed rate mortgage with less than 10% down payment: 0.70%
    • 15-year fixed rate mortgage with more than 10% down payment: 0.45%

    FHA Mortgage Insurance Resources

    • Pros and Cons of FHA Loans
    • Single Family Upfront Mortgage Insurance Premium (MIP)
    fha loan in illinois

    FHA Loans Illinois – Mortgage Information For Your IL FHA Loan in 2020

    There are a lot of great reasons to own a home. It’s a long-term investment in your future. It’s an asset that can become more valuable over time. And you have the security and pride that can only come from owning your own property.fha loan in illinois But as we all know, owning a home is often a difficult and expensive process. It’s important to select the mortgage program that works best for you. So, for a lot of folks that means looking at an FHA loan in Illinois and the FHA loan requirements Illinois.

    We’ve compiled a list of some of the most common questions about Illinois FHA loans and answered them – and if you’re from Illinois yourself, maybe you’ll find that this type of mortgage is right for you. You don’t have to move to Illinois for that. It is a Federal program that wants you to have a house! So, FHA loan requirements Illinois work in all of the US!

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    What is an FHA Loan in Illinois?

    An FHA loan is a type of housing loan that is insured by the Federal Housing Administration, which is a department of the United States federal government.

    The loan is still issued by a private moneylender or bank, but because the FHA promises the reimburse the lender if you can’t make your payments, lenders are willing to make much more substantial loans than they would otherwise.

    In some cases, they will even grant mortgages to applicants who they would normally reject outright! This makes the FHA Loan a great choice for first-time homeowners, low-income families, and buyers who are interested primarily in making a low down payment.

    Click here for more information on FHA Loans.

    What are the different types of FHA loans in Illinois?

    When most people talk about FHA mortgages, they’re thinking of fixed-rate FHA loans. But there are multiple alternatives in this option, and homeowners in Illinois should familiarize themselves with all the options available in their state so that they can pick the FHA loan that’s right for them:
    FHA loan requirements illinois

    • A 5-year adjustable-rate FHA loan in Illinois is an option that’s ideal for low-income and moderate-income families who are buying their first home. An adjustable-rate loan starts at an interest rate that’s lower than the fixed-rate, usually by about one percent. This interest rate holds for five years without changing, which gives the loan recipient time to save up for the larger payments to follow.
    • A fixed-rate FHA loan in Illinois is an option that’s recommended for buyers who want a home but who haven’t been able to save up money for the purchase, often young first-time buyers who have just graduated college or who are recently married. A fixed-rate loan keeps the same interest rate for the entirety of the payback period, which is usually either 15 or 30 years. If your payment changes at all, it will only be slight adjustments arising from deviations in insurance or property taxes.
    • A condominium unit FHA loan in Illinois is for loan applicants who want to buy a condominium unit instead of a traditional house. Condominium units usually – but not exclusively – appeal most to low-income and moderate-income singles.

    Advantages of FHA loan in Illinois

    FHA loans are the most popular in the country – in fact, roughly 30 percent of all home loans in Illinois are insured by the FHA. It’s not hard to see why when you look at the advantages:

    • FHA loans Illinois has a much smaller down payment, charging only 3.5 percent of the total home’s value instead of the more typical 20 percent. This is the biggest advantage of an FHA loan and why this type of loan is most popular with buyers who haven’t been able to save up a lot of money for the purchase of a home.
    • FHA loans in Illinois have much more flexible requirements. FHA-insured lenders will accept credit scores of only 580 and have no minimum income requirements. They also allow for a much higher debt-to-income ratio than traditional mortgages – sometimes approving D-I ratios as high as 50% in place of the usual 31%.

    Because they’re backed by the US Treasury, FHA loans are seen as a much safer investment by moneylenders. As a result, they’re much cheaper upfront and much more accessible and traditional loans. However…

    Disadvantages for an FHA loan

    By now, the advantages of an FHA loan in Illinois should be obvious. But this type of loan can come with disadvantages as well, which is why it’s always best to find the mortgage that works for you. There is no “one size fits all.”

    • FHA loan recipients have to pay an FHA funding fee which usually comes out to about 1.7 percent of the total mortgage. This fee goes to the Federal Housing Administration and is a way for them to protect their investment. Think of it as an insurance premium.
    • FHA loan recipients can’t cancel their Private Mortgage Insurance until they’ve completely paid off the home. In Illinois, conventional mortgages typically let homeowners cancel their PMI after they have accrued equity equal to 20 percent of the total value of the property.
    • FHA loans tend to have slightly higher interest rates, which is how the banks and moneylenders make back their money from the small upfront down payment. This means that FHA mortgages usually cost less upfront but can end up costing more than a conventional loan in the long run.

    What properties qualify for an FHA home loan?

    FHA loans often have lower loan limits than some conventional mortgages. You can see a per-country list that’s up-to-date for 2020 here, but for most counties in Illinois FHA loans can only pay off a property that costs $331,760 or less.

    This is perfect for a low or moderate-income family but may hurt those who are looking at high-cost areas.

    In addition, properties have to meet certain eligibility requirements. You can check them out in the 21-page checklist in Chapter 3 of the Department of Housing and Urban Development’s Handbook 4150.2.

    The house will have to go through an inspection and appraisal. This can be a bit of a hassle – but it’s worth it. Most of these guidelines are safety standards; among other things, appraisers will look for:

    • Faulty HVAC system
    • Roof leakage
    • Plumbing leakage
    • A lack of hot water
    • Low water pressure

    As well as additional requirements for condominiums, which you can see at HUD.gov. Believe me, these are things you want if you’re committing to paying off a property for 30 years.

    How important is credit when applying for an FHA loan in Illinois?

    If you’re applying for a loan, you need a certain amount of credit, but FHA loans Illinois have much lower credit requirements than conventional loans. In Illinois, FHA Underwriters usually require a FICO credit score of 580 and will require three open tradelines on your credit report. Each report needs to have been there for a minimum of 12 months.

    However, having a credit score under 580 won’t necessarily keep you from qualifying. Some banks will accept credit scores as low as 500 – but be aware, they will need to make up for that elsewhere.

    Lower credit scores usually mean higher down payments – sometimes as high as 10 percent. That’s about 3 times the down payment on a typical FHA mortgage, though it’s still lower than most conventional home loans.

    In addition, you may not have to have a traditional FICO credit score to meet FHA loan requirements Illinois. Some lenders will now allow alternative forms of credit. A good example is a long-standing account with your phone or cable company, in place of a credit score.

    What are the FHA loan requirements in Illinois?

    In 2020, the minimum requirements for an FHA mortgage in Illinois are:

    • A minimum credit score of 500 or two forms of alternative credit.
    • A property that is worth less than $331,760 (this varies by county) and meets the minimum property standards
    • A debt-to-income ratio of 50 percent or less

    These are the minimum requirements set by the state and federal government, though lenders will often set their own standards. For example, almost all FHA Underwriters require a credit score of 580. They also seek a debt-to-income ratio of around 30-40 percent. This gets the lowest possible down payment.

    However, it’s always worthwhile to “shop around” for a lender that can meet your needs.

    How do you receive an FHA loan in Illinois?

    US-FederalHousingAdmin fha loan requirements illinois
    Despite a common misconception, the Federal Housing Administration doesn’t originate FHA mortgages. You will need to find a bank, mortgage company, or another moneylender who works with the government to give out these kinds of loans.

    Because these loans are so popular, most lenders will probably have some kind of FHA program in place.

    Once you’ve shopped around and found an FHA-partnered Illinois lender with terms that work for you, you will have to apply for the loan. A representative will ask for proof of your job history, credit score, and income documentation. They will check all this to make sure you fit the federal requirements listed above as well as the requirements of the moneylender.

    This process works just like it does for any other loan.

    What are the FHA loan rates for Illinois?

    That depends. The real estate market is in a constant state of flux and loan rates often change on a daily basis depending on current economic indicators.

    Besides, Illinois is a big state – the rates in Chicago will be different than the rates in, say, Galena. Do research to see which vender in your area is offering the lowest rates. So, your payments won’t become too much to handle down the road.

    Do you have to be a first-time homebuyer for an FHA loan in Illinois?

    No – there is no truth to this common misconception. FHA loans are often recommended for first-time homebuyers because their advantages appeal most to that income bracket. Anyone who meets the minimum requirements printed above can apply for this type of loan.

    What is the maximum income limit for FHA loans?

    The idea of a “maximum income limit” is another common misconception with no truth to it.

    FHA loans are usually best for those in low or moderate-income brackets. It has steep loan limits and somewhat higher interest rates. The best is that there is no maximum income limit for FHA loan applicants in the state of Illinois. So, you got this. You can become a homeowner now!

    Additional Resources

    • Bad Credit Home Loans in Illinois
    • Bad Credit Home Loans in Chicago
    • Home Loans For Illinois Nurses
    fha loan requirements

    FHA Loan Requirements in 2020

    If you want to qualify for one of the best loan programs around, you should really know what the FHA loan requirements are.

    fha loan requirementsThis set of standards makes it easier for people to become homeowners with lower credit scores and lower down payments.

    Understanding what the requirements are can help you to navigate your own path toward homeownership. This can help you even if you still have a little bit of work to do before you meet the minimum standards.

    Many of the FHA loan requirements have been around for a while, but they did come up with new loan limits in 2020.

    For a single-family residence, the new maximum limit for a low-cost area comes to $331,760 and a high-cost area comes to $765,600.

    These were increased just this year to make homeownership more likely for buyers in these areas.

    We Help You Qualify For A FHA Loan Fast

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    If you’re wondering what the rest of the FHA loan requirements are, it’s time to take an in-depth look at what you should prepare for.

    These requirements will give you an idea of what you might need to make yourself more appealing to lenders.

    FHA Credit Requirements 2020

    In the past, most lenders wanted prospective borrowers to maintain a credit score that came in around 620.

    Borrowers who want a conventional mortgage can still expect to come up with a credit score like this for the most favorable interest rates and loan terms.

    fha loan credit requirementsFortunately, the FHA credit requirements are substantially lower than this.

    Most borrowers who want to take full advantage of the FHA mortgage program will need to have a credit score of 580 or higher.

    This allows them to put down a much lower down payment of just 3.5 percent of the purchase price on the property.

    If you are relatively close to reaching this FHA loan credit score, you should really attempt to polish your score before you apply.

    What is the minimum credit score for an FHA loan?

    fha loan credit requirements minimum credit scoreYou can still meet the FHA credit requirements with a lower credit score between 500 and 579.

    These lower credit scores place eligibility under the FHA underwriting guidelines in the realm of possibility for many borrowers who have been struggling to improve their financial standing.

    However, it does come with a cost difference compared to the higher tier.

    Plan to come up with a ten percent down payment when your credit score falls into this bare minimum range.

    While this might make homeownership more difficult for you, it does still lend you plenty of possibilities.

    Can you get an FHA loan with no credit score?

    fha loan with no credit score

    Many lenders are still willing to issue loans to borrowers who do not have credit.

    You might be able to submit alternative lines of credit such as a phone bill or your utility bills.  Your accounts for multiple years with paid bills on time is a good enough proof.

    This makes the FHA mortgage program ideal for first-time homebuyers. They usually haven’t had enough time to build up their own credit score yet.

    Much like with a lower credit score, you might have to come up with a larger down payment if you have no credit at all.

    FHA Loan Debt to Income Requirements

    Lenders have always considered how much debt you have as an important factor on whether they can safely issue you a loan.

    FHA Loan Debt to income RequirementsWhen your debt reaches a dangerously high percentage of your income, it can be difficult to make your mortgage payment each month.

    This is why lenders want to get a clear picture of your finances before they approve you for any type of loan.

    In order to calculate this number, a lender will first tally up all of your accumulated debt that you make payments on.

    These figures include any auto loans, student loans, or credit card payments that you might have on a monthly basis.

    Lenders are only interested in money you have borrowed from other sources. So, it will not include monthly expenditures such as your estimated grocery costs, utility bills, and other items similar to these.

    From here, they will divide your total debt amount by your income and multiply it by 100.

    Let’s say that you have $500 in debt each month due to a car payment and an old student loan. If your gross monthly income is $2,500, that means that your debt to income ratio is 25 percent.

    What is the allowable debt to income ratios for FHA loans?

    Now that you know how to calculate your own debt to income ratio, you should know how lenders use these numbers to decide on your approval for a mortgage.

    what are the allowable debt to income ratios for fha loansThey will use two different debt to income ratios to determine your ability to repay the loan.

    The first number is your front-end debt to income ratio. Lenders will be looking solely at the approximate cost of the monthly mortgage payment with interest compared to your overall income.

    For this calculation, they leave out all of your other debt to see what percentage of your income will go toward housing each month.

    According to the FHA underwriting guidelines, the maximum front-end DTI is 31 percent.

    The second is known as your back-end debt to income ratio. This adds up your mortgage payment and any other debts you might have to see how much you will really owe on a monthly basis.

    The FHA allows debt-to-income ratios of 41 percent when looking at the back-end numbers.

    What do I do if my debt to income ratio is too high?

    Fixing a high debt to income ratio doesn’t have to be extremely difficult, but it might require a little bit of time.

    The only way you can adjust your debt to income ratio is to either increase your income or to decrease your debt.

    The latter tends to be the easier method for lowering the debt to income ratio.

    Paying down some of your old loans can make a huge difference in your debt to income ratio. This is a quick way to make yourself more appealing to lenders.

    FHA Loan Employment Requirements 2020

    The employment requirements for obtaining an FHA loan tend to be a hang-up for many individuals who think they should qualify.

    Lenders really want to see a stable income and a long employment history because those two make you far more likely to repay your mortgage. You should know the specific details regarding these employment requirements.

    How long must you be employed to receive an FHA loan?

    Determining the minimum length of time you must be employed to receive an FHA loan is a little tricky because it can be circumstantial.

    Most lenders want to see a two-year employment history to demonstrate some job stability. This doesn’t have to be all at the same job or even at the same type of job.

    However, it does give them some glimpse into whether you are capable of obtaining and keeping a job.

    how long must you be employed to receive an fha loanUnder the FHA loan employment requirements, you’re allowed to change positions and jobs during these two years. Try to keep your employment changes to less than three to avoid taking additional steps.

    Once you’ve had three job changes in a year, you must show more documentation about your positions and the income you received with each of them.

    The bank might request proof of your qualifications or training to prove that you can handle this position. However, they are more likely to be interested in how your income and benefits improved as a result of each career change.

    Perhaps you had to take a break from working for a while due to unexpected unemployment, a medical issue, or the need to take care of a family member full-time.

    You can still meet the FHA loan employment requirements, even with a gap of more than six months. In order to qualify upon your return to the workforce, you will need:

    • Six months of employment at your current position
    • Two-year history before the employment gap
    • Proof of why you had an extended break

    Ultimately, these are the minimum requirements for employment based on FHA standards. Your lender might have additional requirements they need borrowers to meet before they are willing to issue financing.

    Some research into the specific requirements of every lender will give you a good idea of which lender might be willing to work with your employment history.

    FHA Loan Inspection Requirements

    After it is determined that you personally meet all the necessary criteria for a loan, the lender will turn their attention to your property.

    Every home that receives financing through this program must meet certain guidelines to ensure that it is safe and sanitary for the new home buyer.

    Is an inspection required?

    Yes, a home inspection and appraisal are required to meet the FHA loan inspection requirements. A lender will need to see the full report from a HUD-approved inspector who checked the house for soundness, safety, and general sanitation. They will ensure that the home has things like:

    fha loan inspection requirements

    • Safe electrical systems
    • A strong roof
    • No major damage to the infrastructure
    • Adequate heating
    • Running water and working septic system

    They are not concerned with the cosmetic items that might need to be touched-up on the property.

    These don’t affect the overall safety of the home, so they do not make it into the inspection report that is required by FHA underwriting guidelines. You will paint the walls the color you want anyway when you buy the house.

    Only major issues that could signal significant repairs in the future can be in this report.

    This is to keep you from purchasing a home that seems likely to cause you significant financial hardship in the future.

    Any major safety issues will need to be corrected prior to receiving financing for the property.

    Keep in mind that this inspection is only concerned with general safety and major issues.

    You might still want to hire your own third-party inspector to take a more thorough look at every aspect of the home prior to closing.

    This gives you a better idea of what you might be able to expect in the years ahead with this property.

    Does the FHA require a home inspection?

    Most times, your inspector and appraiser will be the same person. Their primary job is to ensure that you are paying a fair price for the home based on its condition, the price of surrounding real estate, and the area in which it is located.

    does the fha require a home inspection

    They will come up with the market value of the home based on their own research.

    Lenders compare the appraiser’s estimated value to the sale price of the home. An appraisal that comes in too low means they are financing the house for more than it is really worth.

    This could be bad news for a lender in the future if you should default on the payments. It would be much harder for them to recoup the money they invested if the house is overpriced.

    If the appraisal comes back much lower than the sale price of the home, it could potentially derail your financing unless you take further action.

    You might need to renegotiate the sale price with the home’s current owner so that it is more in line with what the appraisal would have estimated.

    Conclusion

    Compared to a conventional mortgage, it should be much simpler for you to meet the FHA loan requirements. They take borrowers with a minimum credit score of 500, provided you can come up with a ten percent down payment.

    Even the debt to income ratios and employment history requirements are slightly more generous than those for conventional mortgages. Once you personally qualify, the only thing you need to figure out is whether the property will pass the FHA’s minimum property standards.

    If you have any questions about whether you meet the FHA loan requirements, be sure to contact your lender today. They should be able to help you determine your own eligibility and offer suggestions if you’re a little short of qualifying.

    Frequently Asked Questions about FHA Loan Requirements

    There is no such thing as a stupid question!

    Are there any 580 credit score mortgage lenders available for FHA loans?

    Yes, there are 580 credit score mortgage lenders available. You can find out if you pre-qualify for one of these loans using our online application here!

    What are the credit requirements for FHA Title I Loans?

    There are no minimum credit scores for the FHA Title I loans. This type of financing makes remodeling a property much more accessible to homeowners, even if they have no equity built up in the property yet.

    Does an FHA loan require a termite inspection?

    The FHA mortgage program does not necessarily require a termite inspection unless there is evidence of a current or previous termite infestation. Some areas and lenders may still require a termite inspection before financing the home.

    Does FHA require PMI?

    Yes, FHA loans do require private mortgage insurance.

    Additional FHA Loan Requirement Resources

    FHA Home Loans: Loan Requirements and Eligibility
    Many lenders are loosening requirements for prospective home buyers
    Mortgage Information for a FHA Loan in North Carolina

    fha loans NJ seal

    FHA Loans New Jersey – Mortgage Information For Your NJ FHA Loan

    fha loans NJ sealOwning a home gives you a sense of security and stability you just can’t get from renting an apartment or a duplex.

    You’re not beholden to anyone – you can keep pets, paint the walls pink, play your music as loud as you want.

    It’s the best place to raise a family – and it’s no wonder that for many, home ownership is seen as the ultimate goal of the American dream.

    There are practical considerations too – a home is a long-term asset whose value can appreciate over time, making home ownership a solid investment.

    Get Pre Qualified for a New Jersey FHA Loan – Click Here.

    But as we all know, home ownership is also expensive and complicated, which is why it’s important to find the mortgage loan program that’s right for you.

    Many New Jerseyans are looking at Federal Housing Administration Loans, or FHA Loans.

    We’ve compiled a handy FAQ about this common type of loan so that you can decide if it’s the right choice for your family.

    What is an FHA Loan in New Jersey?

    fha loans NJ home loanAn FHA loan is a housing loan that is insured by the United States Federal Housing Administration, from which it takes its name.

    These loans are still issued by a private bank or lender, but they’re protected by a promise from the government that if you can’t pay back your loan they will reimburse the moneylender for you.

    Lenders who are partnered with the FHA in this way are willing to give a better deal on a loan than they would otherwise because the money is protected by the promise of the government and the power of the US Treasury.

    However, they can be more expensive than a conventional loan with a large down payment, which is why they mostly appeal to applicants in New Jersey with low credit scores or low income.

    What are the different types of FHA loans in NJ?

    When you hear someone talk about “FHA loans,” they’re usually talking about a fixed rate mortgage. But this is only one type of loan that’s ensured by the Federal Housing Administration.

    In New Jersey, there are three types of FHA loans:

    A 5-year adjustable rate FHA loan in New Jersey. This type of loan starts at a lower interest rate than the more common fixed-rate option and remains at that same low rate for five years, giving the homeowner a chance to settle in and set money aside before making larger payments.

    The starting interest rate for a 5-year adjustable rate mortgage in New Jersey is usually 1 percent lower than the fixed rate.

    This option appeals most to low or moderate income families who have never bought a home before.

    types of fha loans in new jerseyA fixed rate FHA loan in New Jersey. This type of loan has a fixed interest rate that remains steady for the duration of the mortgage – a period of usually either 15 or 30 years.

    The only change in your payments during this time will be from slight deviations in insurance or property taxes.

    This option appeals most to buyers who want a home but haven’t been able to save up money for payments – usually recent college graduates or newlyweds.

    An FHA condominium loan in New Jersey. This type of loan is pretty straightforward – it’s an option for buyers who are purchasing a condominium unit instead of a traditional house.

    What advantages do homeowners have with an FHA loan in New Jersey?

    The US Federal Housing Administration is the largest mortgage insurer in the world and approximately 30 percent of all home loans in the country are FHA loans.

    This is because these types of mortgages come with several advantages:

    FHA loans in New Jersey require a greatly reduced down payment. This is the biggest advantage to choosing an FHA loan over other types of mortgages.

    The usual down payment on a home is twenty percent of the total price, but in New Jersey an FHA mortgage can start with a down payment as low as 3.5 percent.

    This makes this type of loan the best choice for people who have steady work and can make regular payments but who haven’t saved up enough for a large up-front deposit.

    The requirements for FHA loan approval are much more flexible.

    In New Jersey, applicants for an FHA loan need to have worked for the same employer for at least two years, be able to make their down payment, and have a credit score of at least 620.

    That’s it – there’s no minimum income requirement, and 620 is much lower than the 700 credit score the state requires for conventional mortgage applications.

    In many cases, applicants that would normally be turned down will get accepted for an FHA loan because the lender knows they’ll make their money back from the government even if the homeowner defaults.

    FHA loans also benefit the national economy by stimulating the real estate market, expanding the tax base, and creating jobs.

    But for most of us the main benefit of an FHA loan in New Jersey is that it’s cheaper upfront and more accessible than traditional mortgages.

    What are the disadvantages for an FHA loan?

    FHA loans offer many attractive advantages, but they come with disadvantages as well, which is why it’s important to see if you are the type of person best suited to benefitting from this type of mortgage:

    Buyers have to pay an FHA funding fee up front. Though this is still lower than a typical down payment on a home, the Federal Housing Administration charges a fee that’s approximately 1.7 percent of the total mortgage.

    This is how the government protects its investment – it’s basically an insurance premium.

    FHA loan recipients cannot cancel their insurance until they’ve paid off the whole mortgage.

    Conventional home loans usually let recipients cancel private mortgage insurance payments after they’ve accrued a certain amount of equity.

    In practice, this means that the FHA loan payments will probably be higher than those of conventional mortgages especially as you get to the end of the loan term.

    Interest rates are often slightly higher for an FHA loan in New Jersey. This is how the lender makes up for the small up front payment.

    In short, think of an FHA loan as having slightly larger monthly payments in exchange for a much smaller down payment.

    What type of properties qualify for FHA Loans in NJ?

    type of properties fha loans njIn New Jersey, many types of properties qualify for FHA home loans:

  • Townhomes
  • Multi-unit properties
  • Manufactured homes
  • Single-family homes
  • Condominium units
  • These properties must be at least 400 square feet and have been constructed after June 15, 1976.

    They also have to meet rigorous safety standards – a government employee will appraise the house beforehand to make sure these standards are met.

    The complete 21-page checklist these appraisers go through is detailed in Chapter 3 of the Department of Housing and Urban Development’s Handbook 4150.2, which can be found here.

    In brief, they will disqualify a home with:

    • Foundation cracks
    • fha loans nj disqualify

    • Loose handrails
    • Structural concerns
    • Holes or leaks in the roof
    • Low water pressure
    • No hot water
    • Insufficient space
    • Faulty HVAC system

    Among other concerns.

    The property must also cost less than the maximum lending limit for an FHA loan in New Jersey, as described on a county-by-county basis here.

    How important is credit when applying for an FHA loan in New Jersey?

    Credit is a major concern whenever you’re applying for a loan, but one of the major benefits of FHA mortgages is that they have much lower credit requirements.

    In New Jersey, most FHA Underwriters require a middle credit score of 620, as well as three open trade lines on your credit report that have been there for a minimum of 12 months.

    However, this credit limit is not actually set by the federal government. If you “shop around” you may find FHA-partnered moneylenders that will accept credit scores as low as 580. However, these lower credit requirements usually mean a higher down payment.

    Also, some FHA lenders in NJ may consider “additional forms of credit” like long-standing accounts with your phone company or utility services in place of a FICO credit score.

    What are the requirements for an FHA loan in New Jersey?

    requirements fha loans njAs of 2018, these are the typical requirements for an FHA loan in New Jersey:

    • A middle credit score of 620 or two forms of alternative credit.
    • A property that has been appraised and meets the requirements of HUD Handbook 4150.2
    • A property that is worth less than the maximum loan limits described here.
    • A debt-to-income ratio of 50 percent or less
    • Two years of steady employment history
    • Ability to make a down payment of at least 3.5 percent

    FHA Lenders in NJ

    FHA Lenders in NJ can set their own standards for an FHA mortgage in New Jersey, but this is what you’re most likely to see.

    It will often be worthwhile to spend time looking around for a lender that can work with your specific needs.

    How do you receive an FHA loan in New Jersey?

    FHA loans are insured by the American government but are originated by private moneylenders.

    Most likely your local bank or mortgage company in New Jersey will have some kind of FHA loan program in place.

    It’s often recommended to shop around several different lenders to find the one that has the best rate and the requirements that work best for you – the lowest possible down payment, for example, or maybe the most flexible credit scores.

    Once you decide on a FHA lender in NJ, you will apply for the FHA mortgage just as you would for any other loan.

    Your representative will then check your credit score, income, debt, and more to make sure you fit the lender’s requirements and the federal requirements for this type of loan.

    What are the FHA loan rates for New Jersey?

    The real estate market is in a constant state of flux, and as a result, loan rates will change frequently – sometimes even on a daily basis! What’s more, different lenders offer different rates for FHA loans in New Jersey.

    As a result, we can’t give you an exact number for what the loan rate will be where you live. This is why it’s best to do some research before applying to a specific moneylender.

    Do you have to be a first-time home buyer for an FHA loan in New Jersey?

    FHA loans often appeal more to first-time home buyers than to other customers for the reasons we’ve listed above.

    However, despite the common misconception, you do not have to be a first time buyer to be eligible for an FHA loan in New Jersey. That is not one of the federal requirements.

    What is the maximum income limit for FHA loans NJ?

    This is another popular myth with no basis in reality – there is no maximum income limit for FHA loan applicants in New Jersey.

    However, FHA loans are usually a better investment for low-income families who are willing to accept greater ongoing payments in exchange for a lower down payment.

    Get Pre Qualified for a New Jersey FHA Loan – Click Here.