FHA Loans and FHA Mortgages

FHA loans are becoming a vital part of todays financing when it comes to buying a new home or refinancing. You will still hear from some lenders or realtors that FHA financing is not the way to go. Here are some reasons why and the rumors mentioned :

They are old school and dont know about the new appraisal changes that have taken place in the last 5 years. Truth : FHA appraisals are now done the same way as conventional appraisals.

The lender is not FHA approved or understands how FHA mortgages work.

Some loan officers advertise FHA loans as 100% financing. Not true at all.

Some lenders or loan officers have said that the down payment assistance programs (DPA) are dead.

The reality of it is that FHA loans are more in likely the best option for many consumers if their credit scores are below 680 and putting less than 30% down. So, how can we get creative with FHA loans and possibly put no money out of pocket?  Please read below.

Did someone say no money down?  Yes, but again, this is not considered 100% financing. FHA says that you can get up to 100% as a gift for your down payment and closing costs. These monies can either come from a relative or a non-profit organization. There are two types of non-profit organizations. 

1. State or local non-profits that grant you money for going to a first time homebuyers class or course. You have to speak to your township or county for information on this. Each state is different.

2. Then there is the DPA programs such as Nehemiah or Ameridream. (national)

Explaining in more detail about these down payment assistance programs. I use Nehemiah because it is one of the largest non-profit organizations that allows the seller to give money for the down payment and closing costs. And also because I am very familiar with their operation and they have a very quick turn-around time. Why fix something that is not broken, right?

This program is approved by FHA which is part of HUD. Nehemiah can basically get a consumer into their dream home with no money out of pocket. FHA states that you must have 3% of your own money into the deal. And FHA typically asks for 2.25% as your down payment, which is included in the 3% total. This means that you would need to pay an additional 3/4%. But FHA also allows you to receive a 100% gift that can be used for both your down payment and closing costs. 

Nehemiah allows for the seller to contribute up to 6% of the purchase price which can be applied towards the buyers down payment and closing costs as mentioned above. They charge a $499 flat fee for this service. This fee can be paid by the seller, buyer, or even the lender. You can also combine that 6% with the seller contributing another 6% as seller contribution.

What takes place is that the seller gives Nehemiah the money which turns around and gives that money to the buyer as a gift. These gift funds can be for first time home buyers and even repeat buyers. There is no income limitations or geographical restrictions. And the best thing is that you dont even have to repay the money, hence the reason why its called a gift.

Overall, the only thing that needs to happen is to be approved by your lender for the FHA mortgage, that your lender is approved through Nehemiah, and for the seller to contribute the funds. And what is great about FHA mortgages is that they allow for 6% seller contribution. Another reason on how you can get into your dream home with no money out of your pocket. Between Nehemiah and the seller contribution, you could be in that house with as little as zero money out of pocket.

Part 2 is going to go into detail on how a FHA mortgage can work for you and for those with less than perfect credit.

E-mail me at : jbelonger@ihmci.com