Get the Most out of FHA Loans

By: Jerry

In light of the mortgage meltdown, the FHA has been given broader roles in the mortgage business.  Whether you’re making a first-time purchase, buying an investment property or looking for a way out of a bad mortgage deal, the FHA may have something to offer you.

• Lower down payments.  You can get an FHA loan with as low as a 3% down payment, which may be available from your employer or even from a charitable organization or foundation.  Most mortgages won’t allow this.  Depending on the amount you can muster up for a down payment, FHA may be able to pay “points,” (as much as 1% of the note) to the lender as an incentive for them to offer lower loan rates.
• Bad credit OK.  Since FHA home loans are backed by the government, lenders will typically be more lenient on FHA loan qualifications.  You don’t necessarily need top-shelf credit scores to get in the door on an FHA loan.  A personal bankruptcy discharged as little as two years ago still might not hurt you in the FHA loan qualification process.
• FHA Refinance programs.  If you’re one of the thousands of Americans stuck in a bad mortgage, the FHA can offer refinances that can save you a fortune every month.  Depending on your circumstances, you may even be able to work in a debt-consolidation program or a cash-out refinance (not too many of those around these days).  
• Non-conforming home loans.  Depending on your circumstances, you may be able to refinance a loan that exceeds normal Fannie Mae limits.  If you can fall within FHA loan requirements, you may qualify for a “jumbo loan.”  Currently, the ceiling for jumbo loans is set at $417,000, but that may be subject to change soon.
• Safer terms.  The exotic mortgage products of the early 2000s, such as interest-only loans, balloon-payment ARMs and the like are not available in FHA-backed loans.  This makes them ideal for the more cautious, conservative home buyer.  

Bear in mind that there will be closing costs on an FHA mortgage, which may or may not be rolled into the note.  Also, despite the fact that FHA backs the mortgage, you will still have to buy private mortgage insurance.  The PMI payments will generally not come into play until 20% of the principal has been paid down.