SPOTLIGHT
More on "why FHA?"
FHA loans allow people to buy a home with a down payment as small as 3%. It also allows for use of gift funds from the seller. FHA loans are available to anybody but are used most often by first-time home buyers, borrowers with a less then perfect credit history, and low-to moderate-income buyers.
FHA loans offer the following benefits
Easier to use gifts for down payment and closing costs
No prepayment penalties
An FHA loan may be assumable
Manual underwriting when your receive a refer or caution from an automated underwriting system.
Credit History:
If your credit is less than perfect. You may qualify for an FHA loan even though you have had problems in the past.
No mortgage lates in the past 12 months.
Is not FICO scores driven:
FHA is not a fico driven product. Yet it is always best to check with your lender because this lenders do vary in this regard.
Bankruptcy: Chapter 7 and Chapter 13
You can obtain an FHA loan two years from the date of your Chapter 7 bankruptcy discharge, and 1 year from the date of you Chapter 13 discharge as long as you've maintained good credit since your debts were discharged.
Foreclosure:
If you have maintained your credit good standing since a foreclosure, an FHA loan is possible 3 years from the final date of your foreclosure.
Mortage insurance, Rates & Terms:
Mortgage insurance is funded into the loan, meaning a premium of 1.5% is added to the loan balance instead of being paid out-of-pocket. In addition, a small portion for the mortgage insurance premium (.5%)is added to the monthly payment, but it is far less than private mortgage insurance premiums.
Borrowers can finance 97% of the purchase price and this requires a down payment of only 3 percent, which can be paid with gift funds from the seller or a family member, making the down payment nothing to the borrower.
FHA allows for a non-occupying co-borrower(s) (family members)
Debt ratios are higher than the debt-ratio limits for conventional loans. With a manual underwrite the debt ratios are 31/43.