What is an FHA Loan?

Before I get too far into this blog, the question of what is an FHA Loan needs to be answered.

Quite simply, an FHA loan is a loan insured by HUD for the benefit of lenders who make the loans to home owners. HUD will cover losses incurred by the lenders if the home owners default on their loan.

Why would a home owner want an FHA loan? Quite simply, they are much easier to qualify than a conventional loan. For instance, on a conventional loan you need 5% minimum down payment, on an FHA, its only 3.5%. Also, on a conventional loan with less than 20% down, it requires expensive private mortgage insurance.

FHA loans allow the down payment to be gifted by family, churches, non profits and other civic organisations.

The biggest reason for FHA loans is they will loan to those with less than perfect credit. For instance someone who has had a bankruptcy will have to wait 5 yrs to get conventional financing but FHA allows financing after 2 yrs from a bankruptcy discharge. Conventional loans will charge more for those with less than 740 fico and FHA doesn't have "risk based pricing".

An FHA loan also allows a parent to "co-sign" on the loan with their adult child if needed to qualify for the loan. This is called a Non Occupant Co-Borrower. The parent would have to fill out an application, credit, and qualify as if they were making the payment themselves. In many cases this can make the differnence if qualifying or not. After a couple of years, the borrower can refinance into another fha loan and take their parent off the loan.

For more information about Idaho FHA Loans, contact me at my office at 208-955-1234 ext. 30

Thanks for reading my Blog,

Roger Howell

First Time Home Buyers can use their Tax Credit towards their down payment

Here in Idaho, we are lucky to have the ability to use the new tax credit for a first time home buyer's down payment. We can write a 2nd mortgage up to 3.5% of the purchase price ($7,000 limit) that can be the required down payment on an FHA mortgage. This new, "tax credit anticipation loan" is due in full next year after you receive your tax credit from the IRS. Some of the requirements are:

Must be approved for a FHA Mortgage

Must be a first time home buyer in Idaho

Must have a fico score of 640 or higher

Must have a debt to income ratio of no more than 45%

There are other requirements and terms that need to be discussed, so call me at 208-861-7579 to schedule an appointment. Tell me that you wish to discuss the FHA Mortgage and the Tax Credit Anticipation Loan. I look forward to meeting with you.