FHA Insured Mortgage Loans
FHA loans are private mortgage loans that are made by private mortgage lenders that are insured by the Federal Housing Administration against fraud and defaults.
The Federal Housing Administration, FHA, was created in 1934 to induce and promote affordable housing to every hard working American family and make homeownership possible to every American. The Federal Housing Administration became part of the United States Department of Housing and Urban Development back in 1965.
FHA Insured Mortgage Loans: Most Popular Loan Program In The United States
FHA currently insures more than one trillion in home loans in the United States and makes homeownership possible for those with less than perfect credit and those who are first time home buyers. The FHA insured mortgage loan program has insured more than 36 million homes since its inception in 1934 and is the largest home mortgage insurance company in this world and is still going strong.
Why FHA Insured Mortgage Loans?
There are many advantages for a home buyer or homeowner to get a FHA insured mortgage loans versus a Fannie Mae conventional mortgage loans. One of the greatest advantages of getting FHA insured mortgage loans is that it allows smaller down payments whereas conventional mortgage loans require a bare minimum of 5% down payment. FHA minimum down payment requirement is 3.5% down payment.
FHA Insured Mortgage Loans Benefit High Debt To Income Ratio Borrowers
Another major advantage of getting FHA insured mortgage loans is that their lending guidelines are much more generous than Fannie Mae’s conventional loans. Most conventional loans debt to income caps are set at 45%. For FHA insured mortgage loans, caps on debt to income ratios can be as high as 56.9% with mortgage lenders with no internal overlays. Many mortgage loan borrowers with excellent credit scores sometimes need to go with FHA insured mortgage loans due to the fact that their debt to income ratios exceeds the conventional debt to income ratio caps.
FHA Insured Mortgage Loans: Low Mortgage Rates
Another important fact that mortgage loan borrowers need to keep in mind is that FHA insured mortgage loans mortgage rates are normally 050% lower than conventional mortgage rates and FHA does not implement risk based pricing for borrowers with lower credit scores like conventional mortgage loan programs do.
More Advantages With FHA Insured Mortgage Loans
For mortgage loan borrowers with less than perfect credit, no credit, bankruptcy, prior foreclosures, prior short sales, and prior late payment histories, FHA insured mortgage loans may be the only option to go. FHA insured mortgage loans guidelines are much more lenient that other mortgage loan programs such a conventional loans, portfolio loans, VA Loans, USDA Loans, and Homepath Loans ( Which are conventional loans ). A mortgage loan borrower can qualify for FHA insured mortgage loans with credit scores as low as 530 FICO, open collections, judgments, tax liens, recent late payments, recent overdrafts, and high debt to income ratios. FHA insured mortgage loans are ideal for renters who want to become first time home buyers.
FHA insured mortgage loans allow non-occupied co-borrowers
There are many instances where mortgage underwriters will not take into account income that is not source or documented such as cash income. There are many instances where self employed or 1099 workers have sufficient income to qualify for a mortgage loan but the mortgage underwriter will not take that income for qualifying purposes because it is not sourced or it is not documented. Cash is worthless in the mortgage business and cannot be used whatsoever. No exceptions. FHA allows for those who do not qualify for a mortgage loan due to lack of income to get a non-occupied co-borrower. The actual mortgage loan borrower can have zero income but will qualify as long as he or she has a non-occupied co-borrower. FHA insured mortgage loans will allow debt to income ratios as high as 56.9%.
Gustan Cho NMLS ID # 873293
Related> General Rules For FHA Insured Mortgage Loans