FHA Mortgage Loans

The Federal Housing Administration (FHA) encourages home ownership and provides affordable housing opportunities with low down payment and flexible credit requirements and has been doing so since 1934.  An FHA loan is insured against default by the FHA.  This guarantees that lender won’t have to write off a loan if the borrower defaults-the FHA will pay.  Because of this guarantee, lenders are willing to allow for more liberal credit and underwriting standards.

Today the FHA allows for buyers to purchase a home with as little as 3.5% down.  The program is open to nearly everyone, not just first-time home buyers.  In 2009, FHA programs insured nearly 2 million loans, which included ~$750,000 first-time home buyers.

Financing options available:

• 30 or 15 year fixed rate
• Temporary buydowns
• 1 year ARM, 3 Year ARM, 5 Year ARM
• Streamline refinance

Maximum loan amounts for Bastrop, Caldwell, Hays, Travis, and Williamson counties:

• Single Family           $288,750
• Two Family                $369,650
• Three Family             $446,800
• Four Family               $555,300

Some differences in FHA underwriting guidelines:

1)    Minimum credit score is 620 (*as of 4/2011 we accept FICOS as low as 600.  Certain restrictions apply)

2)    An up-front mortgage insurance premium (UFMIP) is required.  This is typically rolled into the borrower’s loan amount.  For a 30-year and 15-year loan, this UFMIP is 1.00% of the base loan amount.

3)     A monthly mortgage insurance premium is added to borrower’s payment.  The amount varies according to loan term and down payment

4)    If a borrower obtains a secured 401K loan as funds for closing, this secured 401K loan payment is not calculated in qualifying ratios.

5)    Gift funds can comprise the entire amount of cash for closing, regardless of down payment amount.  The gift must come from an immediate family member.  Complete gift documentation is required.

6)    The maximum a seller can pay towards the buyers closing costs is 6% of the sales price.

7)    FHA loans may be assumed.  (New borrower must qualify.)

8)    There are no prepayment penalties on FHA Mortgages.

9)    Qualifying ratios are 31/43.

10)  Condominiums must be FHA approved in order to be eligible for financing.