Streamline Refinancing / Purchases
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FHA - Conventional Programs
FHA vs. Conventional
FHA - Rates are lower than Conventional
The main advantage to FHA home loans is that the credit qualifying criteria for a borrower are not as strict as conventional financing.
FHA will allow the borrower who has had a few "credit problems" or those without a credit history to buy a home.
FHA Home Loans
were created by the federal government to provide affordable housing financing for qualified borrowers. FHA provides 100% of the loan, the lender eliminating risk. The borrower pays an initial insurance premium, which is approximately 1.5% of the loan amount. This amount can be absorbed directly into the loan amount. The borrower also pays a monthly premium of .5% of the loan amount divided by 12 months.
FHA requires deposit of 3%. This money can be a gift. No reservations are necessary. Closing costs can be funded in the amount of the loan.
FHA Loan Borrowers must provide proof of income sufficient to demonstrate the ability to pay the mortgage. FHA guidelines are more relaxed, for example, a bankruptcy, which was unloaded at least 2 years, the use of other forms of credit (utilities, cable TV, auto or medical insurance premiums, caring for children, school fees, furniture or appliance store accounts) Place of traditional credit, and higher ratios of debt to income. FHA interest rates are extremely competitive with conventional rates.
Fannie Mae conventional loans are loans made at the risk of the borrower, without the benefit of any warranty insurance or government. A conventional mortgage with a LTV (loan to value ratio) of more than 80% requires primary mortgage insurance, which can be paid monthly.
The borrower must have 5% of its own funds for the payment and 2 months reserves of the deposit. Closing costs should be paid by the borrower.
requirements for a conventional loan include an excellent candidate to credit, job stability with sufficient income, a significant down payment, and a low debt to income. Borrowers who meet Fannie Mae guidelines are rewarded with an interest rate slightly lower than an interest rate FHA.
Conventional mortgage lenders
(Fannie Mae, Freddie Mac) actually allow their
borrowers with good credit to remove the
mortgage insurance if the remaining loan is less
than 80% of the house appraisal. On the other
hand, FHA Loans does
have several schemes in force for
protection to help homeowners who are in trouble
to continue afford the mortgage installments.
This can be very useful if you are worried about
future financial hardships.
FHA loans compare to conventional loans?
Seller can contribute more on a FHA Loan – Up
Borrower can obtain a gift from a relative –
Borrower can obtain 6% of the sale price from
Nehemiah, Ameri-Dream, these are non-profit
agencies approved for gift/down-payment
assistant programs with FHA Loans
Conventional loans usually
require a larger down payment. And, if you have
less than perfect credit you may not qualify for
many conventional loans and find yourself being
offered loans with higher interest rates and/or
fees than you expected. The best thing to do is
compare the cost of the conventional loan to an
FHA loan line-by-line. What are the fees,
interest rate and mortgage insurance on each?
How much down payment is required? For some
borrowers, a conventional loan may be less
expensive. For many others, it will be more
expensive than FHA.
- FHA Comparison
|Maximum Loan Limits per County||Yes||
|Mortgage insurance included in loan||Yes||
|*Maximum purchase loan||97%||
|Rate depends on Credit Score||No||
|Seasoning requirement for bankruptcy||2+ yr||None with some programs|
|Seasoning requirement foreclosure||2+ yr||
||Varies on program|
||Varies on program|
|Drop mortgage insurance with equity||No||
|Non-verified (stated) income programs||No||
* There is a 102% FHA program- 97% first mortgage and a 5% second mortgage. Qualification for the 5% second mortgage though is based on low income limits set per county.
FHA Stream line Refinance
- FHA Requirements