Types Of FHA Loans
FHA Streamline Refinancing: Without Appraisal
This type of FHA refinancing is for those who wish to refinance to obtain a lower interest rate and do not wish to take cash out of their home’s equity. Without appraisal means that there are no appraisals needed on the property to establish value, and no credit evaluations needed to approve the mortgage. The FHA streamline refinancing without approval can eliminate the need to re-qualify because of credit history. However, you will need to reestablish your escrow accounts when you settle the mortgage.
Terms of a streamline refinance are:
The mortgage that you would like to refinance should already be a FHA-approved mortgage.
Cash cannot be withdrawn from equity when using the streamline without appraisal option.
Refinancing should be for the purpose of lowering monthly principal and interest payments only.
Mortgage payments must be current, and a 12-month mortgage payment history will be assessed to make sure that no payments have been late.
No income, asset, or employment verifications are needed to qualify.
Companies are able to offer streamline refinancing in a variety of ways. Some companies advertise "no cost" refinancing, which means no out-of-pocket fees are required to take out a new mortgage. These fees, which typically include mortgage origination fees and closing costs, can be financed into the mortgage if the mortgage amount does not exceed the amount of the original mortgage. Some lenders may require closing costs to be paid when the mortgage is refinanced, which can result in a lower monthly payment, on interest and principals.
FHA Streamline Refinancing: With Appraisal
FHA streamline refinancing with appraisal is similar to that without appraisal, except that it is for homeowners who wish to receive cash from their home’s equity. The other difference between the two is that financing with appraisal requires an appraisal assessment of the property being refinanced, and re-qualification for the mortgage is necessary. Credit, employment, and income requirements will be reassessed upon refinancing with a streamlined, with appraisal mortgage. When you take out a FHA streamline refinance mortgage with appraisal, all closing costs can be refinanced.
Certain standards must be met to refinance with a FHA streamline mortgage. You may be able to refinance without appraisal unless you transition from an adjustable-rate mortgage to a fixed-rate mortgage and the new payment is higher. However, if your new payments will be higher than the previous payments, you will need to refinance with appraisal and undergo all necessary credit, employment, and income verifications. Verifications will also be needed if you refinance to remove a borrower from the previous mortgage, or if you assumed the mortgage without previous credit qualifications within a time period of 6 months.
Why Use FHA Streamline Refinancing?
FHA Streamline Refinancing is a quick and easy way to take advantage of lower interest rates or lower your monthly payments. FHA mortgage qualifications are convenient and only a small amount of money is needed to refinance. If you currently have a FHA mortgage and would like lower payments or cash back from the escrow of your current mortgage, FHA Streamline Refinancing may be the perfect solution.
This type of FHA refinancing is for those who wish to refinance to obtain a lower interest rate and do not wish to take cash out of their home’s equity. Without appraisal means that there are no appraisals needed on the property to establish value, and no credit evaluations needed to approve the mortgage. The FHA streamline refinancing without approval can eliminate the need to re-qualify because of credit history. However, you will need to reestablish your escrow accounts when you settle the mortgage.
Terms of a streamline refinance are:
The mortgage that you would like to refinance should already be a FHA-approved mortgage.
Cash cannot be withdrawn from equity when using the streamline without appraisal option.
Refinancing should be for the purpose of lowering monthly principal and interest payments only.
Mortgage payments must be current, and a 12-month mortgage payment history will be assessed to make sure that no payments have been late.
No income, asset, or employment verifications are needed to qualify.
Companies are able to offer streamline refinancing in a variety of ways. Some companies advertise "no cost" refinancing, which means no out-of-pocket fees are required to take out a new mortgage. These fees, which typically include mortgage origination fees and closing costs, can be financed into the mortgage if the mortgage amount does not exceed the amount of the original mortgage. Some lenders may require closing costs to be paid when the mortgage is refinanced, which can result in a lower monthly payment, on interest and principals.
FHA Streamline Refinancing: With Appraisal
FHA streamline refinancing with appraisal is similar to that without appraisal, except that it is for homeowners who wish to receive cash from their home’s equity. The other difference between the two is that financing with appraisal requires an appraisal assessment of the property being refinanced, and re-qualification for the mortgage is necessary. Credit, employment, and income requirements will be reassessed upon refinancing with a streamlined, with appraisal mortgage. When you take out a FHA streamline refinance mortgage with appraisal, all closing costs can be refinanced.
Certain standards must be met to refinance with a FHA streamline mortgage. You may be able to refinance without appraisal unless you transition from an adjustable-rate mortgage to a fixed-rate mortgage and the new payment is higher. However, if your new payments will be higher than the previous payments, you will need to refinance with appraisal and undergo all necessary credit, employment, and income verifications. Verifications will also be needed if you refinance to remove a borrower from the previous mortgage, or if you assumed the mortgage without previous credit qualifications within a time period of 6 months.
Why Use FHA Streamline Refinancing?
FHA Streamline Refinancing is a quick and easy way to take advantage of lower interest rates or lower your monthly payments. FHA mortgage qualifications are convenient and only a small amount of money is needed to refinance. If you currently have a FHA mortgage and would like lower payments or cash back from the escrow of your current mortgage, FHA Streamline Refinancing may be the perfect solution.
More FHA Info
The FHA does not lend the money; it simply insures that the total mortgage will be paid to the lender if the buyer defaults. It is always the decision of the private lender (a bank, credit union, or savings and loan) to decide whether or not they will lend the money.
The FHA mortgage program tends to be more forgiving than conventional mortgages in terms of past credit history. A bankruptcy discharged as little as two years ago may not hinder a homebuyer from qualifying for the FHA program.
Typically, FHA mortgages do not require more than a 3-5 percent down payment. Unlike traditional loans, this money may also be a gift to the homebuyer and does not need to be secured as the homebuyer's own money. Often, there are "points" associated with FHA mortgages that are usually worth about 1 percent of the total mortgage value. These points are paid to lenders to help lower the interest rate of the mortgage.
Borrowers will also have to pay PMI (private mortgage insurance) on the mortgage. PMI is used to ensure that the total amount of the mortgage will be paid to the lender if the buyer defaults. Usually, a PMI will not be put into effect until 20 percent of the mortgage has been paid.
FHA mortgages have no mortgage value cap. In other words, you can take out a FHA mortgage for $150,000 - $300,000 without any restrictions, other than credit applicability.
Closing costs on FHA (or conventional loans) are usually between 2-3 percent of the total mortgage amount and are the responsibility of the buyer. However, FHA closing costs can be financed into the total amount of the mortgage and paid off accordingly.
To be approved for a FHA mortgage, you must have a satisfactory credit history, which shows your commitment to paying off debts in a timely manner. Also, you must be able to prove that the total monthly mortgage payment will be less than 29 percent of your monthly income. The number arrived at after multiplying your total monthly income by 29 percent is referred to as PITI, or principle, interest, property taxes, and insurance. The PITI amount is the highest amount that your monthly mortgage payments may be. Furthermore, long-term debt, such as car loans and credit card balances, in addition to the monthly PITI amount cannot be more than 41 percent of your total monthly income. More information about loan qualifications is available from the FHA.
While these qualifications may seem a little stringent, they are actually more lenient than traditional mortgage qualifications. The decreased down payment makes this type of mortgage even more desirable for many people.
The FHA mortgage program tends to be more forgiving than conventional mortgages in terms of past credit history. A bankruptcy discharged as little as two years ago may not hinder a homebuyer from qualifying for the FHA program.
Typically, FHA mortgages do not require more than a 3-5 percent down payment. Unlike traditional loans, this money may also be a gift to the homebuyer and does not need to be secured as the homebuyer's own money. Often, there are "points" associated with FHA mortgages that are usually worth about 1 percent of the total mortgage value. These points are paid to lenders to help lower the interest rate of the mortgage.
Borrowers will also have to pay PMI (private mortgage insurance) on the mortgage. PMI is used to ensure that the total amount of the mortgage will be paid to the lender if the buyer defaults. Usually, a PMI will not be put into effect until 20 percent of the mortgage has been paid.
FHA mortgages have no mortgage value cap. In other words, you can take out a FHA mortgage for $150,000 - $300,000 without any restrictions, other than credit applicability.
Closing costs on FHA (or conventional loans) are usually between 2-3 percent of the total mortgage amount and are the responsibility of the buyer. However, FHA closing costs can be financed into the total amount of the mortgage and paid off accordingly.
To be approved for a FHA mortgage, you must have a satisfactory credit history, which shows your commitment to paying off debts in a timely manner. Also, you must be able to prove that the total monthly mortgage payment will be less than 29 percent of your monthly income. The number arrived at after multiplying your total monthly income by 29 percent is referred to as PITI, or principle, interest, property taxes, and insurance. The PITI amount is the highest amount that your monthly mortgage payments may be. Furthermore, long-term debt, such as car loans and credit card balances, in addition to the monthly PITI amount cannot be more than 41 percent of your total monthly income. More information about loan qualifications is available from the FHA.
While these qualifications may seem a little stringent, they are actually more lenient than traditional mortgage qualifications. The decreased down payment makes this type of mortgage even more desirable for many people.
FHA Q & A
Q: What is a FHA mortgage?
A: A FHA mortgage is a form of insurance. The FHA does not lend money; private lending organizations, such as banks, credit unions, or savings and loans, lend money. A FHA-approved mortgage is insured to the lender in case the homebuyer defaults on the loan.
Q: What are the advantages of a FHA mortgage?
A: There are many advantages of a FHA mortgage. Typically, only a 3 percent down payment is required to secure a FHA mortgage. Unlike conventional mortgages, the money for down payment does not have to be verified as the buyer's money; it can be a gift to the home purchaser from outside sources. In addition, the credit qualifications for a FHA mortgage are often less stringent than qualifications for conventional mortgages. Bankruptcy or foreclosure does not necessarily disqualify a borrower from approval if the processes have been completed within the required time period.
Q: Are FHA mortgage processes complicated?
A: No more so than conventional mortgage processes. FHA financing procedures have slimmed down in the past 20 years. In some cases, it is easier to qualify for a FHA mortgage than it is for a conventional mortgage.
Q: Who is eligible for a FHA mortgage?
A: Anyone who meets the credit, income, and employment requirements is eligible for a FHA mortgage. U.S. citizenship is not required for a FHA mortgage. The property secured with the mortgage must be the purchaser's primary residence. A social security card is necessary to qualify for a FHA mortgage.
Q: What is mortgage insurance, and how does it apply to FHA mortgages?
A: Mortgage insurance is required to secure a FHA mortgage. Insurance money is collected by the lender (the bank, credit union, or savings and mortgage) and paid to the FHA. If a buyer defaults on the mortgage, the money will be returned to the lender in the form of insurance against the default. Mortgage insurance costs are typically 1 percent of the total mortgage. Private mortgage insurance may be required until 20 percent of the equity in the home has been paid.
Q: What are the different types of FHA mortgages?
A: Like conventional mortgages, there are several different types of FHA mortgages. A fixed-rate mortgage secures an interest rate at the time of purchase and remains constant for the life of the mortgage. There is also an adjustable-rate mortgage (ARM). The interest rate on an ARM fluctuates throughout the life of the mortgage, mirroring the current national index. There is also a graduated-payment mortgage (GPM), which requires a down payment and has negative amortization.
Q: What are the interest rates on FHA mortgages?
A: FHA mortgage interest rates are on par with the national average for conventional mortgages. FHA mortgage interest rates reflect current market conditions. A buyer may also use points when securing a FHA mortgage. "Points" lower the interest rate, and must be used as a down payment or financed through the mortgage.
Q: What are the expenses of a FHA mortgage?
A: When purchasing a house with a FHA mortgage the buyer is responsible for the following: Down payment (usually no more than 3 percent), appraisal fee, escrow, mortgage origination fee (typically 1 percent of base mortgage amount), recording fees, credit report charges, title insurance policy fees, MMI impounds, hazard insurance and reserves, MIP (mortgage insurance, which can be financed), and property taxes.
A: A FHA mortgage is a form of insurance. The FHA does not lend money; private lending organizations, such as banks, credit unions, or savings and loans, lend money. A FHA-approved mortgage is insured to the lender in case the homebuyer defaults on the loan.
Q: What are the advantages of a FHA mortgage?
A: There are many advantages of a FHA mortgage. Typically, only a 3 percent down payment is required to secure a FHA mortgage. Unlike conventional mortgages, the money for down payment does not have to be verified as the buyer's money; it can be a gift to the home purchaser from outside sources. In addition, the credit qualifications for a FHA mortgage are often less stringent than qualifications for conventional mortgages. Bankruptcy or foreclosure does not necessarily disqualify a borrower from approval if the processes have been completed within the required time period.
Q: Are FHA mortgage processes complicated?
A: No more so than conventional mortgage processes. FHA financing procedures have slimmed down in the past 20 years. In some cases, it is easier to qualify for a FHA mortgage than it is for a conventional mortgage.
Q: Who is eligible for a FHA mortgage?
A: Anyone who meets the credit, income, and employment requirements is eligible for a FHA mortgage. U.S. citizenship is not required for a FHA mortgage. The property secured with the mortgage must be the purchaser's primary residence. A social security card is necessary to qualify for a FHA mortgage.
Q: What is mortgage insurance, and how does it apply to FHA mortgages?
A: Mortgage insurance is required to secure a FHA mortgage. Insurance money is collected by the lender (the bank, credit union, or savings and mortgage) and paid to the FHA. If a buyer defaults on the mortgage, the money will be returned to the lender in the form of insurance against the default. Mortgage insurance costs are typically 1 percent of the total mortgage. Private mortgage insurance may be required until 20 percent of the equity in the home has been paid.
Q: What are the different types of FHA mortgages?
A: Like conventional mortgages, there are several different types of FHA mortgages. A fixed-rate mortgage secures an interest rate at the time of purchase and remains constant for the life of the mortgage. There is also an adjustable-rate mortgage (ARM). The interest rate on an ARM fluctuates throughout the life of the mortgage, mirroring the current national index. There is also a graduated-payment mortgage (GPM), which requires a down payment and has negative amortization.
Q: What are the interest rates on FHA mortgages?
A: FHA mortgage interest rates are on par with the national average for conventional mortgages. FHA mortgage interest rates reflect current market conditions. A buyer may also use points when securing a FHA mortgage. "Points" lower the interest rate, and must be used as a down payment or financed through the mortgage.
Q: What are the expenses of a FHA mortgage?
A: When purchasing a house with a FHA mortgage the buyer is responsible for the following: Down payment (usually no more than 3 percent), appraisal fee, escrow, mortgage origination fee (typically 1 percent of base mortgage amount), recording fees, credit report charges, title insurance policy fees, MMI impounds, hazard insurance and reserves, MIP (mortgage insurance, which can be financed), and property taxes.