First time home buyers will find that FHA is consumer friendly and offers all borrowers a chance at homeownership provided the borrower meets FHA’s qualifications. Borrowers must meet the regular FHA credit qualifications which are more lenient than other mortgage types. Depending on the credit score, a borrower may be eligible to receive 96.5% financing with an FHA mortgage. While FHA charges an upfront mortgage insurance premium, this fee can be financed into the mortgage under certain conditions. For many borrowers, purchasing a single family residence is too expensive and is not an option. With FHA mortgages, eligible properties can be from one to four unit structures which will allow borrowers to receive rental income which will help pay the mortgage. FHA mortgage loan limits vary depending on the area, but these loan limits are also higher depending on the number of units. In some cases, many first time home buyers are interested in purchasing a lower priced home that requires renovations. This is possible with an FHA rehab mortgage which provides the funds necessary for the improvements to be performed.

First time home buyers will find that many states offer down payment assistance in the form of a grant or low cost loan. Often, a first time home buyer is someone who has not owned a home within the most recent three years. These programs go well with FHA mortgages and, in many instances, reduces the amount of cash a borrower needs to purchase the home. Along with this, FHA also offers home counseling which provides borrowers the information that they need for budgeting when purchasing a home. Counseling can help borrowers understand how much they can afford, as well as, setting up a financial plan that will last. Information received from counseling can also help borrowers improve their credit scores while, at the same time, give them the knowledge they need to reduce their debt.

FHA has many perks available for first time home buyers that will aid and encourage them with their home purchase. While assisting borrowers with FHA mortgages, FHA also attempts to educate first time home buyers of the process and long term benefits of homeownership.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

While most mortgages must be paid in full when a property is sold, FHA mortgages can be assumable by a qualified buyer. This means that the buyer can take over the FHA mortgage at the original FHA mortgage rates. The FHA assumable mortgage is only valid for a borrower who plans to occupy the property since this benefit is not offered to investors. There is no remaining liability to the seller which means that the new buyer must qualify under the normal FHA underwriting guidelines. The seller cannot make cash contributions to the buyer, but can contribute to the buyer’s closing costs which are lower than the fees charged with a new mortgage origination. The buyer is also permitted to use secondary financing and borrowed funds for the transaction.

In today’s housing market, home prices are down and FHA mortgage rates are historically low. Current FHA 30 year mortgage rates are at 3.250% and FHA 15 year fixed mortgage rates are at 2.750%. Home buyers who purchase homes today with low FHA mortgage rates have the benefit of offering their home for sale years down the road at the same low mortgage rates offered today. This option can be a strategic method when it comes to selling a home. Not only will potential buyers be assuming a lower FHA mortgage rate, but they will also be qualifying for the FHA mortgage at that lower rate. This alone gives the seller the benefit of more qualified buyers available to purchase the home.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

Under FHA guidelines, non-occupying co-borrowers can be one or more individuals who are a vital part of the mortgage transaction but will not be a resident of the property. When the co-borrowers are not relatives, the maximum mortgage amount is limited to 75% loan to value, which means that the required down payment must be 25% or more. Maximum financing with a 3.5% down payment is available for borrowers who have co-borrowers related by blood, marriage or law. This category includes spouses, parents, children, siblings, step children, aunts, uncles, nieces and nephews. In some cases, co-borrowers who are not related, but have a long and substantial relationship with the borrower that is similar to family, can be used as long as documented evidence is submitted and approved. Further, when a parent is selling a home to a child, the loan to value must be 75% or less if the parent is also going to be a co-borrower.

It is required that all borrowers, including the non-occupying co-borrower, sign the note and mortgage since all parties are obligated to the transaction. Although additional underwriting criteria is not required by FHA, each transaction with a co-borrower is looked at very carefully for the integrity of the loan in order to make sure that the co-borrower is not developing a portfolio of properties or acting as a strawbuyer.

The non-occupying co-borrower option with an FHA mortgage is another benefit available from FHA to assist with the purchase of a home. It is available to help college students, self employed borrowers, those who are in between jobs, recently discharged military and those who may be returning to the workforce. For many, having a co-borrower who is non-occupying on an FHA mortgage may be the only means available to qualify for the mortgage in order to become a homeowner.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

Many people think that obtaining FHA mortgages is too troublesome because additional paperwork is often required. In recent years, FHA mortgage underwriting guidelines have actually become easier when compared to conforming mortgage guidelines set by Fannie Mae and Freddie Mac. With FHA mortgages, underwriting can be done electronically or manually by an FHA underwriter. When underwriting an FHA mortgage manually, the underwriter examines everything in the loan file and will accept letters of explanation for any issues regarding income and credit. There is a lot of consideration given when adverse information is present that would otherwise cause a rejection of a borrower’s loan application. FHA is actually much more forgiving and considerate when it comes to a borrower’s history. When explanations are requested, the additional paperwork should be welcomed by borrowers since it brings them closer to a loan approval.

With FHA mortgages, credit score requirements are lower and down payments start at 3.5%. As with all mortgage types, both FHA and conforming, any down payment of less than 20% requires some type of mortgage insurance. When considering the additional cost of FHA’s upfront mortgage insurance premium, FHA allows this to be rolled into the loan as part of the mortgage. Many feel that property appraisals for FHA mortgages tend to be more extensive, but this protects both the borrower and the lender. FHA mortgages require that properties be safe, livable and up to code which is something that borrowers should embrace. Of course, there is always the issue of mortgage rates that are a concern to borrowers. FHA mortgage rates are competitive and sometimes even lower than conforming mortgage rates. Current FHA 30 year fixed mortgage rates are at 3.250% while conforming 30 year mortgage rates are at 3.500%.

Looking at just a few of the positives of FHA mortgages, it is surprising that more people did not use them for financing in the past. Now that sub prime mortgages are gone, borrowers are finding out that FHA mortgages may have be the best choice all along.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

It is the FHA appraiser’s duty to check the property and report his findings, which includes necessary repairs, renovations and deterioration, on the FHA appraisal. FHA does not require that all deficiencies be repaired. Some of the items that do not need to be tended to prior to closing are cracked glass, damaged doors, defective paint, minor plumbing issues, worn flooring, worn out counters, damaged plaster, walls or ceilings.

In order to meet FHA approval, there are many items that must be remedied prior to closing. Some of these issues are electrical boxes that have exposed or frayed wires must be replaced, all rooms that will be lived in must have a heat source, the water heater must meet local building codes, the property must provide safe and adequate access including from the road, there must be a toilet, sink and shower and any asbestos found must be inspected by a professional. The appraiser must look in the attic in order to determine roofing issues. The roof must be expected to last at least 2 years and keep moisture out during that time period. The roof cannot have more than three layers of roofing and, therefore, if any problems are found with a roof that has three or more layers, an entire new roof is required. Property conditions and location are also looked at for any potential hazards such as contaminated soil, oil and gas wells on the property, distance to hazardous waste sites, airports and other sources of noise, distance to high voltage power lines or radio and TV transmission towers. Any structural deficiencies or conditions that can lead to future damage, such as leakage, decay, termites and dampness, must be also be repaired in advance of closing.

FHA appraisers are approved by FHA and, therefore, are knowledgeable about the terms of the FHA mortgage and the requirements of the FHA appraisal. Often, when adverse conditions are found, many home buyers will find themselves searching for another property since no arrangements could be made with the seller. Although this may seem like an inconvenience, property conditions for FHA mortgage approval are there to protect the borrower who is looking for a pleasant place to live that does not reveal a lot of costly problems after closing.

The FHA anti-flipping waiver is limited to home sales that meet certain conditions. The sales transaction must not include any interest between the buyer and seller or any other parties that have a participation to the transaction. Any property considered under this waiver must be marketed openly and fairly. When the sales price is above 20 percent of the seller’s purchase price, the lender must justify the increase in value through documentation and other specific conditions. Documentation showing substantial renovations and improvements is recommended and/or a second appraisal is also acceptable. In some cases, it may also be necessary for the lender to order an inspection to make sure all repairs have been completed. The property must also not show a pattern of multiple title transfers within the past twelve months. This FHA anti-flipping waiver is not permitted for the Home Equity Conversion Mortgage (HECM) for purchase program.

As a result of the high number of foreclosures and abandoned homes, FHA recognizes the need for investors who purchase property and rehabilitate them for resale. By waiving the anti-flipping guidelines, FHA is encouraging investors to purchase and renovate properties for quick resale in order to provide affordable housing in areas where a high number of foreclosures have occurred. This does not mean that the anti-flipping waiver is limited to foreclosures. By extending this waiver, FHA knows that this helps to also stabilize entire neighborhoods and communities. Since its inception in 2010, the FHA temporary anti-flipping waiver has proved to be a success and has continued to receive overwhelming support.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

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Under the guidelines for FHA mortgages, a single family home is a stand alone unit. It can also be attached to another building as long as it is separated by a wall which does not permit access to the other unit. It can be a patio home, a condominium or a townhouse. Row houses and townhouses, which share common walls, are built for one or more family units and are acceptable for FHA mortgages. FHA will also insure homes that have up to four living units with each unit designed for individual families. These are considered multiplex units and are financed under one deed by one owner and, therefore, is also considered a single family home. A condominium is an individual unit that is part of a multiple unit complex. While a borrower owns the inside of the condominium unit, the exterior walls and other property amenities are maintained by the homeowner’s association. The monthly condominium association fees cover the maintenance of the common property and allows a borrower to use the common areas, such as the pool and club house. FHA also recognizes manufactured homes as single family dwellings as long as the home has at least 400 square feet of living space and is fixed to a permanent foundation. It must have been constructed after 1976 and be certified to meet stringent safety and manufacturing regulations. The FHA mortgage for manufactured housing must include both the home and the land it sits on which means that the borrower must own the land. The foundation, grading and elevation of the land must also meeting FHA guidelines. FHA also insures PUDs which stands for Planned Unit Development. A PUD is a community of town homes or single family homes that has a homeowner’s association. Membership is mandatory, as well as the homeowner’s association fee which is used to maintain roads and common property. In a PUD, the borrower owns the land as well as the home which gives some flexibility when it comes to things such as landscaping.

The FHA mortgage application will have to include the property type information prior to moving forward with the mortgage process. This information is necessary because, depending on the property, each type has certain guidelines to follow and information that must be obtained, such as in the case of condominiums. Properties with multiple units also have higher loan limits than a one unit property. This brings to light the importance of having the real estate contract submitted to the lender at the same time that the FHA mortgage application is completed.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

FHA has made condominium approval guidelines stricter than it was in the past. In order for a condominium to be FHA approved, no more than 25% of the property’s total floor area can be for commercial purposes. Keeping with FHA’s affordable housing policy, it should be no surprise that no more than 10% of the units can be owned by one investor, while at least 50% of the units must be owner occupied. Since home owners association dues are an important part of keeping the maintenance of condominiums up to date, FHA does not allow more than 15% of the total units to be in arrears (more than 30 days past due). Since so many people use FHA mortgages for financing, FHA will not allow more than 50% of the total units in an approved condominium to have outstanding FHA case numbers or active FHA insured loans which reduces their risk in one development. When the 50% limit has been reached, FHA will not assign any further FHA case numbers. There must be also be adequate insurance and a separate reserve account set up for emergencies by the HOA. While these requirements may have been in effect in the past, some of the percentages have changed and have become difficult for condominiums to meet with today’s real estate environment.

FHA has now made it necessary that condominiums be re-certified for approval every two years. For these reasons, it is very important that borrowers who are interested in purchasing a condominium be ready to perform the necessary research to make sure that the condo is approved and for how long. Unapproved condos can apply for approval, but this takes time and can delay any scheduled closing. To help consumers with their search, FHA keeps an active list of approved condos that can be accessed by anyone at any time. It it reasonable to say that borrowers who plan on using an FHA mortgage should check this list prior to actually looking at any condominium to purchase.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

Traditional gift funds require the borrower document relationship, where the funds came from and a gift letter verifying that the funds are not a loan that the borrower is obligated to pay back. When there are numerous gifts involved, there is little chance that any borrower would go through this trouble to use gift funds. The FHA Bridal Registry makes gifting easier for everyone involved. It is basically a custodial savings account set up for the purpose of funding the couple’s down payment which can be started prior to the wedding. After setting up the account, benefactors are given the details and then can deposit gift funds directly into the account. Cash or checks can also be given directly to the couple who can then deposit the gifts to the account. The FHA Bridal Registry can also be used for other occasions that are legitimate when gifts are received, such as birthdays, graduations, etc., which can then be put towards the FHA down payment of a home. When the FHA mortgage is being underwritten, a letter from the participating lender and borrower is used to certify that the deposits shown in the bank account statement were not made by an anyone with a financial interest in the transaction or participants to the transaction.

Having to decide what to give newlyweds is no longer an issue since the FHA Mortgage Bridal Registry makes gifting easy. For the couple, it reduces receiving duplicate gifts that need to be returned. In addition, the money always belongs to the recipients even if later they decide not to use the money for an FHA mortgage down payment. They are free to use the money as they want with no penalties attached.

When FHA loan limits were raised to $729,750 several weeks ago, it really meant that this is the maximum allowed loan amount that FHA will lend for mortgage financing. This maximum amount is usually slated for metropolitan areas where both the cost of living and home prices are higher. In high cost areas such as California, New York, New Jersey and other states across the country, there is no doubt that many borrowers will now take on FHA mortgages due to the higher loan limits. Although for many counties across the country, looking at the FHA percentage is much more relevant. For conventional mortgages, those that meet the guidelines and funding terms of Fannie Mae and Freddie Mac, the loan limit is $417,000 and is capped at $625,500 in high cost areas. For FHA mortgages, the loan limit is 125% of an area’s median home price and is capped at $729,750 in high cost areas. For example, in Broward County, Fl the conventional loan limit is $417,000 and the FHA loan limit is now $423,750 and in Philadelphia County, Pa the conventional loan limit is $417,000 and the FHA loan limit is $420,000. While this may not be significant in all counties across the country, especially those hit hard by falling home prices, it will be a deciding factor in many areas.

For current FHA borrowers, this is an additional benefit since FHA’s streamline refinance does not require an appraisal and could, therefore, help underwater borrowers. Although FHA streamline refinances must show a definite benefit of monthly savings of 5% or more to a borrower, this is not difficult since FHA mortgage rates are so low. Current FHA 30 year fixed mortgage rates are at 3.500%, FHA 15 year fixed mortgage rates are at 3.000% and FHA 5/1 adjustable mortgage rates are at 3.000%.

These new FHA loan limits are in place until the end of 2013. As months pass and more borrowers learn about these differences, we may once again begin to see that FHA mortgages become a major choice of mortgage financing for most borrowers.