Tuesday, June 4, 2019

FHA Loans Are On The Rise & Looking Strong

Long-term mortgages weren’t always en vogue. Not so long ago five-year “term” mortgages were the norm. After every five years replacement loans for sought after.

However term loans quickly encountered a problem. Should the market decline or a job be lost, term loans become unavailable. That was the plight many homeowners entered into during the Great Depression. The need to provide homeowners with loans they could access was filled in 1934 when the newly-formed Federal Housing Administration (FHA) began offering long-term mortgage loans insured by the federal government. As a result millions of Americans were eligible for long-term mortgages with little down that would allow them to ride-out tough times.

Today an FHA loan is one of the most sought after mortgages in today’s market. In 2017, 17% of all mortgages were FHA loans.

Whatever the numbers, if you’re a first-time buyer or someone looking for liberal qualification standards, the FHA program is worth considering. And given coming changes in the lending industry, it’s likely that we’ll see a lot more FHA loans in 2006 and beyond.

Under the FHA program you can secure a loan with as little as 3 percent down. That’s 97-percent financing, a good deal by traditional standards though it’s fair to point out that 100-percent financing is now widely available. However, the 3-percent downpayment can be in the form of a gift or grant — in fact for the past decade the FHA has even allowed couples to establish a “bridal registry” where friends and relatives can contribute to a downpayment fund.

In addition, the FHA program offer owners the unique option of soliciting money from sellers. Sellers can kick in 1-6% of the cost of the home. A seller might do this to convince the buyer to purchase their home.

To qualify for an FHA loan, lenders examine your monthly income and expenses. For a conventional loan the guidelines might allow you to spend 28 percent of your gross monthly income on housing costs such as mortgage interest, principal, property taxes and home insurance (PITI). In addition, loan guidelines might allow you to spend 36 percent on PITI plus other monthly debts such as credit card bills and auto loan payments.

With FHA fixed-rate financing the usual ratios are 31/43. More liberal standards will allow borrowers to get more financing than with conventional loans. FHA also offers an “energy efficient mortgage” or EEM. If you have an energy-efficient home the FHA infers that you’ll have lower utility costs so there’s more money in the till each month for mortgage payments. The FHA guidelines allow for 33/45 ratios with EEM financing. While FHA is full of its advantages, it doesn’t come free of cons.

Under the FHA program borrowers are buying with little money down. This is only possible because the government insures the loan and you pay an insurance premium. The premium is equal to 1.5 percent of the sale price at closing (an amount which can be financed) and .5 percent per year for the outstanding loan balance. In other words, if you can buy with 20 percent down or with 80-10-10 financing you may want to skip the FHA program and avoid the insurance fees.

FHA loans are also accompanied by a complex set of loans limits which means there may not be enough loan money to buy a property. For instance, in 2006 the conventional loan limit for single-family homes in the continental U.S. was $417,000. By law, the maximum FHA mortgage is 87 percent of the conventional loan limit, or $362,790 in 2006. However, this upper loan figure is only available in high-cost areas — and in many high-costs areas FHA loans are simply insufficient to acquire typical homes.

If you live in a community with less expensive housing it’s likely that the amount you can borrow under the FHA program will be lower. Larger FHA loans are available for two-, three- and four-unit properties, providing at least one unit is owner-occupied. Your mortgage lender can explain the amount of FHA financing available in your community for the type of property you want to purchase.

Along with only supplying borrowers with a limited amount of money for the past few years there has been another factor which has made FHA loans less attractive than other forms of financing. This factor is largely to blame for the loan’s declining popularity.

In 1998, the FHA started the Homebuyer Protection Plan. The idea was to have appraisers examine homes for physical defects. The idea is sound, however most appraisers are not qualified as professional home inspectors.

Many homeowners thought they might save money because an FHA appraisal under the protection plan sure sounded like a home inspection. Much to the homeowner’s displeasure as a result many buyers decided not to get their property checked by a professional inspector.

HUD has tried to change things around by threatening appraisers that didn’t meet requirements with prosecution under the federal False Claims Act. As a result appraisers have raised their rates because of the new requirements or refused to appraise homes for FHA borrowers.

The new costs associated with getting a house appraised led lenders to advise borrowers against FHA loans.

The HUD effort was not carried out by conventional lenders or the Department of Veterans Affairs. As a consequence many approved houses in fact have many defects including one home approved for FHA financing in Detroit that was found to have 181 building code violations.

By doing away with appraisal standards, FHA loans have risen as of recent. FHA loans are once again being offered by a myriad of lenders thus creating a more competitive market. To understand the ever changing ins and outs of an FHA loan, consult the loan experts at Affiliated Mortgage. This lender has been around for more than 30 years and serves communities from Rapid City to Minneapolis.

Long-term mortgages weren’t always en vogue. Not so long ago five-year “term” mortgages were the norm. After every five years replacement loans for sought after.

However term loans quickly encountered a problem. Should the market decline or a job be lost, term loans become unavailable. That was the plight many homeowners entered into during the Great Depression. The need to provide homeowners with loans they could access was filled in 1934 when the newly-formed Federal Housing Administration (FHA) began offering long-term mortgage loans insured by the federal government. As a result millions of Americans were eligible for long-term mortgages with little down that would allow them to ride-out tough times.

Today an FHA loan is one of the most sought after mortgages in today’s market. In 2017, 17% of all mortgages were FHA loans.

Whatever the numbers, if you’re a first-time buyer or someone looking for liberal qualification standards, the FHA program is worth considering. And given coming changes in the lending industry, it’s likely that we’ll see a lot more FHA loans in 2006 and beyond.

Under the FHA program you can secure a loan with as little as 3 percent down. That’s 97-percent financing, a good deal by traditional standards though it’s fair to point out that 100-percent financing is now widely available. However, the 3-percent downpayment can be in the form of a gift or grant — in fact for the past decade the FHA has even allowed couples to establish a “bridal registry” where friends and relatives can contribute to a downpayment fund.

In addition, the FHA program offer owners the unique option of soliciting money from sellers. Sellers can kick in 1-6% of the cost of the home. A seller might do this to convince the buyer to purchase their home.

To qualify for an FHA loan, lenders examine your monthly income and expenses. For a conventional loan the guidelines might allow you to spend 28 percent of your gross monthly income on housing costs such as mortgage interest, principal, property taxes and home insurance (PITI). In addition, loan guidelines might allow you to spend 36 percent on PITI plus other monthly debts such as credit card bills and auto loan payments.

With FHA fixed-rate financing the usual ratios are 31/43. More liberal standards will allow borrowers to get more financing than with conventional loans. FHA also offers an “energy efficient mortgage” or EEM. If you have an energy-efficient home the FHA infers that you’ll have lower utility costs so there’s more money in the till each month for mortgage payments. The FHA guidelines allow for 33/45 ratios with EEM financing. While FHA is full of its advantages, it doesn’t come free of cons.

Under the FHA program borrowers are buying with little money down. This is only possible because the government insures the loan and you pay an insurance premium. The premium is equal to 1.5 percent of the sale price at closing (an amount which can be financed) and .5 percent per year for the outstanding loan balance. In other words, if you can buy with 20 percent down or with 80-10-10 financing you may want to skip the FHA program and avoid the insurance fees.

FHA loans are also accompanied by a complex set of loans limits which means there may not be enough loan money to buy a property. For instance, in 2006 the conventional loan limit for single-family homes in the continental U.S. was $417,000. By law, the maximum FHA mortgage is 87 percent of the conventional loan limit, or $362,790 in 2006. However, this upper loan figure is only available in high-cost areas — and in many high-costs areas FHA loans are simply insufficient to acquire typical homes.

If you live in a community with less expensive housing it’s likely that the amount you can borrow under the FHA program will be lower. Larger FHA loans are available for two-, three- and four-unit properties, providing at least one unit is owner-occupied. Your mortgage lender can explain the amount of FHA financing available in your community for the type of property you want to purchase.

Along with only supplying borrowers with a limited amount of money for the past few years there has been another factor which has made FHA loans less attractive than other forms of financing. This factor is largely to blame for the loan’s declining popularity.

In 1998, the FHA started the Homebuyer Protection Plan. The idea was to have appraisers examine homes for physical defects. The idea is sound, however most appraisers are not qualified as professional home inspectors.

Many homeowners thought they might save money because an FHA appraisal under the protection plan sure sounded like a home inspection. Much to the homeowner’s displeasure as a result many buyers decided not to get their property checked by a professional inspector.

HUD has tried to change things around by threatening appraisers that didn’t meet requirements with prosecution under the federal False Claims Act. As a result appraisers have raised their rates because of the new requirements or refused to appraise homes for FHA borrowers.

The new costs associated with getting a house appraised led lenders to advise borrowers against FHA loans.

The HUD effort was not carried out by conventional lenders or the Department of Veterans Affairs. As a consequence many approved houses in fact have many defects including one home approved for FHA financing in Detroit that was found to have 181 building code violations.

By doing away with appraisal standards, FHA loans have risen as of recent. FHA loans are once again being offered by a myriad of lenders thus creating a more competitive market. To understand the ever changing ins and outs of an FHA loan, consult the loan experts at Affiliated Mortgage. This lender has been around for more than 30 years and serves communities from Rapid City to Minneapolis.

A Little About Affiliated Mortgage

By simplifying the mortgage process and providing clients with high quality home loans, Affiliated Mortgage strives to build unified and lasting communities. For over 30 years we’ve been supplying residents of South Dakota (Rated as top quality lenders Rapid City), North Dakota, Wisconsin, Wyoming, Colorado, and Arizona with low mortgage rates that enable them to achieve the milestone of owning or refinancing their own home.  We are headquartered in Rapid City, SD and we are the top mortgage loan provider to a variety of surrounding cities including, Ellsworth Air-force Base, Box Elder, The Black Hills, Ashland Heights, Rapid Valley, Black Hawk, Piedmont, Sturgis, Deadwood, Lead, Keystone, and Belle Fourche.  We also have a trusted presence in Sioux Falls, SDSpearfish, SD,Pierre, SD, Fargo, NDBismarck, NDCasper, WYGillette, WYCheyenne, WYDenver, CO, and Phoenix, AZ. Our trusted reputation is built on our sincere resolve to build relationships of trust, respect, and accountability. Our chief goal is to provide clients with the best loans possible so that we can welcome them into our communities. If you are looking for the best mortgage companies near you, Affiliated Mortgage is your answer.

A Little About Affiliated Mortgage

By simplifying the mortgage process and providing clients with high quality home loans, Affiliated Mortgage strives to build unified and lasting communities. For over 30 years we’ve been supplying residents of South Dakota (Rated as top quality lenders Rapid City), North Dakota, Wisconsin, Wyoming, Colorado, and Arizona with low mortgage rates that enable them to achieve the milestone of owning or refinancing their own home.  We are headquartered in Rapid City, SD and we are the top mortgage loan provider to a variety of surrounding cities including, Ellsworth Air-force Base, Box Elder, The Black Hills, Ashland Heights, Rapid Valley, Black Hawk, Piedmont, Sturgis, Deadwood, Lead, Keystone, and Belle Fourche.  We also have a trusted presence in Sioux Falls, SDSpearfish, SD,Pierre, SD, Fargo, NDBismarck, NDCasper, WYGillette, WYCheyenne, WYDenver, CO, and Phoenix, AZ. Our trusted reputation is built on our sincere resolve to build relationships of trust, respect, and accountability. Our chief goal is to provide clients with the best loans possible so that we can welcome them into our communities. If you are looking for the best mortgage companies near you, Affiliated Mortgage is your answer.

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