A couple years ago, FHA was the most rarely used program for lenders. It was the most time consuming and cumbersome program to send your borrower through as compared to the stated or conventional programs being offered to just about any borrower. Now FHA it is a staple for the typical lender and if you are a lender and don't know it, you better!!!
FHA began as an initiative to stimulate the lending and mortgage industry after the depression of 1929 and was introduced by president Herbert Hoover. The most problematic piece of the economy at that time was the housing market. Construction workers were out of work, homes were deteriorating and foreclosures on mortgages were increasing.
Since job growth is a major economic factor that stimulates real estate, it's no wonder that the housing market went downhill during and after the great depression of 1929. In 1934 FHA was created and by the end of that year the first home in the United States built was done so using FHA insured financing - in New Jersey!!
Most people have heard of FHA financing but few borrowers know the true workings of an FHA insured loan.
1. FHA does not lend money to borrowers for homes - FHA insures the mortgage. A lending institution still funds the loan.
2. FHA is not government funded.
3. FHA is a non-profit organization that stays in business from the mortgage premiums it collects through the mortgage. Mortgage Premiums are paid to FHA via A.) the upfront mortgage premium which can be added into the loan amount of 1.5% and B.) the monthly premium sent in with your mortgage payment of .5%
4. FHA insures make sense loans. It is true that they are not as credit score driven as the conventional loans, however, the content of your credit report is still important and very relevant.
5. FHA will insure mortgages to people who have had Bankruptcies, however, they do not like borrowers who have had bad credit after the bankruptcy. This is very important. Additionally, there should be a good reason for the bankruptcy and the borrower needs to document the reason for the hardship in writing. Ask yourself this question, would you lend yourself the money based on your credit history. Does it make sense to lend the money? Do you show a likelihood that you will repay the mortgage? Credit History is important and cannot be treated frivolously.
6. FHA likes documentation. You will be required to prove documentation that you earn enough money to pay for all your existing debts plus the mortgage payment and still remain under a conservative debt ratio.
7. FHA likes job history. 2 years in the same industry is the minimum.
8. FHA likes first time home buyers
9. FHA has loan limits. You can visit FHA loan limits to see what the restriction is for your county. The federal government recently increased FHA loan limits so be aware that this is in place until the end of 2008.
10. FHA requires that judgements be paid off. Any delinquent IRS, federal or student loan debt will disqualify the borrower. Make sure your taxes and student loans are current and paid timely.
Contact Casey Moseman in order to find out
if you qualify for an FHA home loan