FHA - Federal Housing Administration Guaranteed Loans
VA - Veterans Affairs Guaranteed Loans

FHA - Federal Housing Administration Guaranteed Loans

An FHA insured loan is a Federal Housing Administration mortgage-insurance-backed mortgage loan, which is provided by a FHA-approved lender. FHA loans have been helping people become homeowners since 1934. The Federal Housing Administration (FHA) – which is part of HUD – insures the loan, so your lender can offer you a better deal, including:

• Low down payments
• Low closing costs
• Easy credit qualifying

The program originated during the Great Depression, when the foreclosure rates and defaults rose sharply, and the program was intended to provide lenders with sufficient insurance. Some FHA programs were subsidized by the government, but the goal was to make it self-supporting, based on insurance premiums paid by borrowers. Over time, private mortgage insurance (PMI) companies came into play, and now FHA primarily serves people who cannot afford a conventional down payment or otherwise do not qualify for PMI. The program has since been modified to accommodate the recent recession.

Buying your first home?
FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties.

Want a fixer-upper?
FHA has a loan that allows you to buy a home, fix it up, and include all the costs in one loan. Or, if you own a home that you want to re-model or repair, you can refinance what you owe and add the cost of repairs - all in one loan.

Financial help for seniors:
Are you 62 or older? Do you live in your home? Do you own it outright or have a low loan balance? If you can answer "yes" to all of these questions, then the FHA Reverse Mortgage might be right for you. It lets you convert a portion of your equity into cash.

Want to make your home more energy efficient?
You can include the costs of energy improvements into an FHA Energy-Efficient Mortgage.

How about manufactured housing and mobile homes?
Yes, FHA has financing for mobile homes and factory-built housing. They have two loan products – one for those who own the land that the home is on and another for mobile homes that are, or will be, located in mobile home parks.

FHA Refinance:
FHA refinancing is only available to homeowners who are currently using their home as their principal residence.

FHA options to homeowners who are considering an FHA refinance mortgage:

FHA Cash-Out Refinance
This refinancing option is especially beneficial to homeowners whose property has increased in market value since the home was purchased. A Cash Out refinance allows homeowners to refinance their existing mortgage by taking out another mortgage for more than they currently owe.

FHA Streamline Refinance
This refinancing option is considered streamlined because it allows you to reduce the interest rate on your current home loan quickly and often times without an appraisal. FHA Streamlined Refinance also cuts down on the amount of paperwork that must be completed by your lender, saving you valuable time and money.

Rules for FHA Streamline Refinancing Loans:
The FHA Streamline Loan option features reduced paperwork and faster processing than the initial FHA loan application, but these loans don’t permit money back to the borrower as they are designed primarily to give lower payment or interest rates.

FHA Streamline Refinancing Rules for Adding/Removing Borrowers:
If a borrower is getting a divorce, for example, refinancing the property under a single person’s name (removing the spouse) would make sense. The reverse is true for a single borrower who is refinancing and getting married.

FHA Refinancing and Ownership Issues:
One of the most frequently asked questions about refinancing is connected ownership of the home and who is listed on the FHA loan. According to the FHA, the rules allow anyone with ownership of the property (legal title) may apply for FHA refinancing.

Please contact us for more information on FHA guaranteed loans

VA - Veterans Affairs Guaranteed Loans

A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders, and VA “stands behind” the loan with that lender. If something goes wrong and you can’t make the payments anymore, the lending institution can go to VA to cover any losses they might incur.

The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to support home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment.

Who’s Eligible:

• Veterans
• Active duty personnel
• Certain reservists and National Guard members
• Surviving spouses of persons who die on active duty or die as a result of service-connected disabilities
• Certain spouses of active duty personnel who are (a) missing in action, (b) captured in line of duty by a hostile force, or (c) forcibly detained by a foreign government or power

Here are some advantages of the VA program:

• You can buy a home without a down payment - as long as the sales price doesn’t exceed the appraised value. (Of course, you have to qualify in terms of income and credit.)
• You won’t need to buy private mortgage insurance.
• VA rules limit the amount you can be charged for closing costs.
• Closing costs may be paid by the seller. (You should keep this in mind when negotiating the sales price.)
• The lender can’t charge you a penalty fee if you pay the loan off early.
• VA may be able to provide you some assistance if you run into difficulty making payments.

You should also know:

• You don’t have to be a first-time homebuyer.
• You can reuse the benefit.
• VA-backed loans are assumable, as long as the person assuming the loan qualifies.

Size of the Loan
VA doesn’t specify a maximum loan amount. But the law does set limits on the amount of liability VA can assume. This usually affects the amount of money an institution will lend you.
The lender may be able to increase the size of the loan if you can make a down payment.

Information on Loan Limits
When the lending institution is deciding how big a loan you can afford, it uses either of two methods:

• One Method is the “residual income calculation.” The lender adds up your routine housing expenses, taxes, and additional debt payments such as your car and credit cards. He or she subtracts this total from your income. Then the lender decides whether you’ll have enough money left over for everyday living.
• The second method is the debt-to-income ratio. Under VA’s rules, this is the ratio of your total debt (both housing and other debt) to your income.

Your Costs
The VA Funding Fee. Although VA doesn't require private mortgage insurance they do charge a funding fee. (This can be folded into the loan.) If you receive service-connected disability payments each month, you're exempt from the fee.

Information on Funding Fees

Other Costs of the Loan:
Other costs will be involved. Of course, the lender charges interest. And some other fees and charges have to be paid at closing. Here are some general rules:

• The lender, not VA, sets the interest rate, the “discount points,” and closing costs. These rates may vary from lender to lender.
• The seller can pay for some closing costs. (Under VA rules a seller’s “concessions” can’t exceed 4% of the loan. But only some types of costs fall under this 4% rule. Examples are: payment of pre-paid closing costs, VA funding fee, payoff of credit balances or judgments for the veteran, and funds for temporary “buydowns.” Payment of discount points is not subject to the 4% limit.)
• You’re not allowed to pay for the termite report, unless the loan is a refinance. That fee is usually paid by the seller.

Please contact us today for more information on VA guaranteed mortgages.