What_is_FHA_loan_ by zhucezhao

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									What is FHA loan?

Word Count:
659

Summary:
The Federal Housing Administration (FHA), a wholly owned government
corporation, was established under the National Housing Act of 1934 to
improve housing standards and conditions. FHA is not a loan, It’s an
Insurance! If a home buyer defaults, the lender is paid from the
insurance fund.FHA's mortgage insurance allows individuals to qualify who
may have been previously denied for a home loan by conventional
underwriting guidelines. FHA helps low and moderate-income families
purchase homes.


Keywords:
FHA loans, Student loans, Commercial loans, Payday loans, Car loans, ARM,
PITI, HELOC, Balloon Mortgage, reverse mortgage


Article Body:
Home mortgages are important part of the loans universe but we will
concentrate here On a specific one called FHA. The Federal Housing
Administration (FHA), a wholly owned government corporation, was
established under the National Housing Act of 1934 to improve housing
standards and conditions. Its goal was to provide an adequate home
financing system through insurance of mortgages, and to stabilize the
mortgage market.

FHA is not a loan, It’s an Insurance! If a home buyer defaults, the
lender is paid from the insurance fund. An FHA loan allows you to buy a
house with as little as 3% down payment, instead of the higher
percentages required to secure many conventional loans. Taking advantage
of the FHA loan program is a great way for first time buyers, or anyone
with a shortage of down payment funds, to buy a home. It is not a program
reserved only for first time home buyers. You can buy your third or
fourth home with an FHA loan. The only stipulation is that you may only
have one FHA loan at a time.

FHA helps low and moderate-income families purchase homes by keeping the
initial costs down. By serving as an umbrella under which lenders have
the confidence to extend loans to those who may not meet conventional
loan requirements, FHA's mortgage insurance allows individuals to qualify
who may have been previously denied for a home loan by conventional
underwriting guidelines. It also protects lenders against loan default on
mortgages for properties that include manufactured homes, single-family
and multifamily properties, and some health-related facilities.

The two very basic terms you need to understand is PITI and Long Term
Debt. PITI stands for Principle, Interest, Taxes, and Insurance. It is
with relations to your Mortgage and property housing total monthly cost.
Your maximum PITI should not exceed 29% of your gross monthly income.
Long term debt includes such things as car loans and credit cards
balances.
In order to qualify for FHA loan your PITI + Long Term Debt should not
exceed 41% of gross monthly income.

This is much lenient terms compared to conventional loan terms of maximum
PITI of 26% - 28% and Total PITI + Long Term Debt of 33% -36%.

Qualifying for an FHA loan you need the followings:

- Good credit history that shows you meet your financial obligations.
- PITI + Long Term Debt not to exceed 41% of gross monthly income.
- Sufficient cash down payment at time of closing. 3% of the total cost.
- Closing expenses cost of 2%-3% of the price of the house.
  (Homeowner’s Insurance, Attorney’s fees, title fees, and title
insurance,
   Private Mortgage Insurance if you are paying less than 20% down, the
loan
   origination fee, and a fee that goes into the FHA insurance fund).

The FHA ARM - Adjustable Rate Mortgages is a HUD - US Department of
Housing and Urban Development, mortgage specifically designed for low and
moderate-income families who are trying to make the transition into home
ownership. At the time it is issued, the ARM usually has an interest rate
several percentage points below a fixed rate mortgage. The interest rate
can change as market conditions change. If interest rates go up, so does
your mortgage payment. If they come down, your mortgage payment comes
down, too.
The reverse mortgage is often of interest to senior homeowners. This loan
provides cash for living, health or other expenses. Payments are made to
the borrower in a lump sum or monthly. Most reverse mortgages are issued
to those 62 and older who own a debt-free home with no tax liens.
A Home Equity Line of Credit (HELOC) lets you use equity in your home to
pay for home improvements, debt consolidation or other financial goals.
With an acceptable debt, credit and employment history, you may be able
to borrow up to 85% of the appraised equity in your home.

Balloon Mortgage - the buyer pays interest for three to five years on a
balloon mortgage. After that the entire principal comes due all at once.

Source: http://www.loans-money-infoweb.com/

								
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