The FHA, or Federal Housing Administration, provides mortgage insurance on loans made by FHA-approved lenders. It is the largest insurer of residential mortgages in the world, insuring tens of millions of properties since 1934. The federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments
FHA loans are very popular, especially with first-time home buyers because the requirements are less strict than conventional loans. Borrowers can qualify for an FHA loan with a down payment as little as 3.5% and a credit score of 580 or higher. The borrower’s credit score can be between 500 – 579 if a 10% down payment is made.
How long an FHA borrower has to wait to buy again?
Another advantage of an FHA loan is for borrowers who have undergone a bankruptcy, short sale or a foreclosure. The event seasoning requirement is much shorter than conventional loans. For Chapter 7 Bankruptcy is 2 years from discharge. For Chapter 13 Bankruptcy is 1 year of payment period with satisfactory performance and permission from the court. For Short Sales and Foreclosures, the seasoning is 3 years from completion.
Mortgage Insurance is Required for an FHA Loan
FHA loan requires two kinds of mortgage insurance premiums: one that can be financed into the mortgage, and the other one in the monthly payment.
Upfront mortgage insurance premium (UFMIP) — this is a one-time upfront monthly premium payment, which means borrowers will pay a premium of 1.75% of the home loan, regardless of their credit score. Example: $300,000 loan x 1.75% = $5,250.00
Annual MIP (charged monthly) — Called an annual premium, this is actually a monthly charge that will be figured into your mortgage payment. The amount of the mortgage insurance premium is a percentage of the loan amount,
based on the borrower’s loan-to-value (LTV) ratio, loan size, and length of loan:
|Loan Term||LTV Ratio||Annual Insurance Premium|
|30 years||95% or less||0.80%|
|30 years||Over 95%||0.85%|
For example, the annual premium on a $300,000 loan with term of 30 years and LTV less than 95 percent would be $2,400: $300,000 x 0.80% = $2,400. To figure out the monthly payment, divide $2,400 by 12 months = $200. So, the monthly insurance premium would be $200 per month.
How Long Do Borrowers Have to Pay FHA Mortgage Insurance
The duration of your annual MIP will depend on the amortization term and LTV ratio on your loan origination date. For loans with FHA case numbers assigned on or after June 3, 2013 borrowers will have to pay mortgage insurance for the entire loan term if the LTV is greater than 90% at the time the loan was originated. If your LTV was 90% or less, the borrower will pay mortgage insurance for the mortgage term or 11 years, whichever occurs first.
|Term||Loan-to-Value (LTV) Ratio||Duration|
|15 years or less||78% or less||11 years|
|15 years or less||79-89%||11 years|
|15 years or less||90% or higher||Full loan term|
|Over 15 years||78% or less||11 years|
|Over 15 years||79-89%||11 years|
|Over 15 years||90% or higher||Full loan term|
FHA Loan Limits
The Federal Housing Authority sets maximum mortgage limits for FHA loans that vary by state and county. Instant PQ will let you know the maximum loan amount in your county. In Broward, Dade and Palm Beach counties, you may be able to get financing for a loan size up to $345,000.00 with a
3.5 percent down payment. Conventional financing for loans that can be bought by Fannie Mae or Freddie Mac are currently at $453,100.00 before it becomes a Jumbo loan.
How much are the Closing Costs on an FHA loan?
Some of your FHA loan closing costs may be financed (like upfront MIP), and some may–after being negotiated between buyer and seller–be paid by the seller within the boundaries of the FHA loan program’s rules. The
borrower also has the option to pay some closing costs out of pocket, which in South Florida with most lenders they typically are about six percent of the gross selling price. However, with Bluecastle Lending your settlement charges are substantially lower, as we do not charge you any fees. You can get an instant estimate by visiting our Loan Estimate page.
During the market recession when it was a buyer’s market, we used to get the seller to pay all of the closing costs. Today in South Florida however, its a seller’s market and this could be very difficult to achieve. This is one of the reasons we have the CCAP program.
How much cash do I need using the Closing Cost Assistance Program (CCAP)?
The below chart is an illustration of how much a borrower will approximately need for everything, including down payment and settlement charges. You can also get an instant estimate by visiting our Loan Estimate page.
|Purchase Price||580 Score||600 Score||620 Score||640 Score||660 Score||680 Score||700 Score||720 Score|
How Do You Get an FHA loan?
The process is simple. You call Bluecastle Lending and speak with a Mortgage Loan Originator. The MLO will ask you a few preliminary questions to make sure you are likely to qualify for a loan before even pulling credit or getting any personal information. Typical questions before filling out a loan application are:
• Do you know what your credit score is?
• How much money do you have to buy a house?
• What price range are you considering?
• Have you had any short sale, foreclosure, BK, judgments or liens?
• Are you employed or self-employed?
• If self-employed, have you filed your 2017 and 2016 taxes and if so, how much is your Adjusted Gross Income?
Alternatively, you can run Instant PQ and get an instant answer as to whether or not you would qualify for the loan.
FHA Loan Interest Rates
Bluecastle Lending interest rates are amongst the lowest mortgage rates in the country, and your 30-year fixed rate will depend on how good your credit score is. The lender contribution could be applied to bring your interest rate
down (substantially), or to pay for your closing costs (substantially). Adjustable rate mortgages are also available through FHA however, unless you are planning on living on the property a very short period of time, we do not
You can also get an instant mortgage rate quote through our automatic pricing engine.