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Using FHA to Puchase a Home
FHA Loan Facts
The Federal Housing Administration (FHA) is a government agency that provides mortgage insurance on single family and multi-family dwellings in the United States and U.S. territories to protect lenders on mortgages in case the borrowers default. Since its creation in 1934, FHA has been recognized as the largest insurer of residential mortgages in the world.
Low Down Payments
Minimum 3.5% down payment required
Acceptable Sources of Down Payment Funds
- Earnest Money Deposit
- Savings and Checking Accounts
- Private Savings clubs
- Savings Bonds
- IRA
- 401 (k) and Keogh Accounts
- Stocks and Bonds
- Thrift Savings Plan
- Gifts
- Sale Proceeds from Prior Property
- Sale of Personal Property
- Sales Commissions
- Trade Equity
- Sweat Equity
- Collateralized Loans
- Disaster Relief Loans or Grants
- Employer’s Guaranteed Plans
- Employer Assistant Plans
- Tax Refunds
- CalPERS Personal Loan from CalPERS Account
FHA Mortgage Insurance
All FHA insured loans require the borrower to pay for mortgage insurance which protects the lender against loss that result from the borrower defaulting on the home mortgage.
FHA Loan Limits
FHA loan limits vary according to the type of dwelling and the state and county where the property is located.
FHA Loan Process
Have your social security number, employment information and a list of your assets and liabilities ready. Also be prepared to pay for a property appraisal and credit report.
FHA Guidelines Regarding Closing Costs
The FHA guidelines define acceptable closing costs that are allowed to be charged by the lender to the borrower. Each FHA local office will determine the specific costs and amounts that are reasonable. One thing to keep in mind is that the seller of a property may pay up to 6% of the purchase price for the buyer’s closing costs. This saves the buyer money and the worry of having to come up with additional funds at closing.
FHA Debt to Income Ratios
Borrowers must meet the FHA debt to income ratio guidelines that have been implemented to prevent borrowers from obtaining a mortgage they cannot afford.
FHA Credit
FHA looks at the applicant’s past credit performance and history to make sure they have a stable record of making timely payments.
