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Fha Loans, What Do You Need To Qualify?
By Amit Laufer, Thu Dec 8th
/p> Most of us need to borough some money at least at one point oftime in our life. When we want to buy a car, to study at theCollege or University, when we want to buy a house or home, whenwe need money to start our own Business even when we use ourcredit cards. There are many types of loans and mortgages, such as FHA loans,Student loans, College loans, Business loans, Personal loans,Commercial loans, Payday loans, Auto loans, Car loans, Vehicleloans, Mobile home loans, Motorcycle loans, Military loans,Construction loans, Home loans, house loans, home equity loans,Bridge loans, Disaster loans, farm operating loans, Agricultureloans, Debt consolidation loans, Direct Loans, Government loans,Unsecured loans, refinance/remortgage loans, Bad credit loansetc' Just to name a few. Within each loan term there areadditional sub terms such as Fixed rate vs. Variable rate,Adjustable rate, ARM, PITI, HELOC, Balloon Mortgage, reversemortgage and other bewildering financial terms we will try toclarify here.
What is FHA
Home mortgages are important part of the loans universe but wewill concentrate here On a specific one called FHA. The FederalHousing Administration (FHA), a wholly owned governmentcorporation, was established under the National Housing Act of1934 to improve housing standards and conditions. Its goal wasto provide an adequate home financing system through insuranceof mortgages, and to stabilize the mortgage market. FHA is not a loan, It's an Insurance! If a home buyer defaults,the lender is paid from the insurance fund. An FHA loan allowsyou to buy a house with as little as 3% down payment, instead ofthe higher percentages required to secure many conventionalloans. Taking advantage of the FHA loan program is a great wayfor first time buyers, or anyone
with a shortage of down paymentfunds, to buy a home. It is not a program reserved only forfirst time home buyers. You can buy your third or fourth homewith an FHA loan. The only stipulation is that you may only haveone FHA loan at a time. FHA helps low and moderate-income families purchase homes bykeeping the initial costs down. By serving as an umbrella underwhich lenders have the confidence to extend loans to those whomay not meet conventional loan requirements, FHA's mortgageinsurance allows individuals to qualify who may have beenpreviously denied for a home loan by conventional underwritingguidelines. It also protects lenders against loan default onmortgages for properties that include manufactured homes,single-family and multifamily properties, and somehealth-related facilities. The two very basic terms you need to understand isA.PITI and B. Long Term Debt. PITI standsfor Principle, Interest, Taxes, and Insurance. It is withrelations to your Mortgage and property housing total monthlycost. Your maximum PITI should not exceed 29% of your grossmonthly income. Long term debt includes such things as car loans and creditcards balances. In order to qualify for FHA loan your PITI +Long Term Debt should not exceed 41% of gross monthly income.This is much lenient terms compared to conventional loan termsof maximum PITI of 26% - 28% and Total PITI + Long Term Debt of33% -36%. Qualifying for an FHA loan you need the followings: - Good credit history that shows you meet your financialobligations. - PITI + Long Term Debt not to exceed 41% of gross monthlyincome. - Sufficient cash down payment at time of closing. 3% of thetotal cost. - Closing expenses cost of 2%-3% of the price of the house.(Homeowner's Insurance, Attorney's fees, title fees, and titleinsurance,Private Mortgage Insurance if you are paying less than20% down, the loan origination fee, and a fee that goes into theFHA insurance fund). The FHA ARM - Adjustable Rate Mortgages is a HUD -US Department of Housing and Urban Development, mortgagespecifically designed for low and moderate-income families whoare trying to make the transition into home ownership. At thetime it is issued, the ARM usually has an interest rate severalpercentage points below a fixed rate mortgage. The interest ratecan change as market conditions change. If interest rates go up,so does your mortgage payment. If they come down, your mortgagepayment comes down, too. The reverse mortgage is often of interest to seniorhomeowners. This loan provides cash for living, health or otherexpenses. Payments are made to the borrower in a lump sum ormonthly. Most reverse mortgages are issued to those 62 and olderwho own a debt-free home with no tax liens. A Home Equity Line of Credit (HELOC) lets you use equityin your home to pay for home improvements, debt consolidation orother financial goals. With an acceptable debt, credit andemployment history, you may be able to borrow up to 85% of theappraised equity in your home. Balloon Mortgage - the buyer pays interest for three tofive years on a balloon mortgage. After that the entireprincipal comes due all at once.
For additional Info: http://www.loans-money-infoweb.com/Site_Map.html About the author:MBA - International Trade & Finance - Heriot-Watt University.Bsc. Computers and Information Systems - Long Island University- C.W Post Campus. Hobby: Photography. Married with two Children. Owner and Editor of: http://www.loans-money-infoweb.com/Site_Map.html
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