I found this brief but explanatory article on FHA loans. If you are refinancing then you should know all your options so you can make the best choice.

FHA UPDATE
The Economic Stimulus Act of 2008 allowed FHA to insure higher loan amounts - up to 125% of the area median price. Before the new limits were passed, the max FHA loan amount was 95% of the area median price, meaning this is an increase of 30% across the nation. Please call me for details.

In your mortgage research you may have seen or been offered a FHA mortgage loan. So just what is an FHA mortgage loan and what type of borrower is it appropriate for?

FHA stands for Federal Housing Authority which is a division of the department of Housing and Urban Development (HUD). The FHA is in charge of administering various federal housing programs, one of which is the FHA mortgage loan program.

An FHA loan is a regular mortgage loan that the Federal Housing Administration insures on behalf of the borrower against a default on the loan. Lenders who issue mortgages through the FHA program have that additional degree of protection and as a result are more likely to issue a mortgage loan. What this means to you is that an FHA mortgage loan can be easier to get than a conventional loan.

The good news doesn't stop there. FHA mortgages feature additional money saving benefits for borrowers. Most conventional mortgage loans require a sizable deposit, sometimes as high as 10 - 15 percent of the purchase price. Ouch! With an FHA mortgage loan, downpayment requirements are much lower - as low as just 3%.

An FHA loan carries no prepayment penalty, so if you are in a position to pay off your mortgage early you won't face fees and penalties for it. All lenders that participate in the FHA program are required to keep the origination fees at less than one percent of the loan value. This also will save you money and keep closing costs down. Speaking of closing costs, the FHA can help finance your closing costs and they offer mortgage insurance as well.

All of these benefits have made FHA mortgage loans a very attractive option for many borrowers. The FHA mortgage loan program has helped thousands of low to mid income households achieve their dreams of homeownership. Since the beginning of the program (in the 1930's), the FHA has insured over 33 million home mortgages. At the current time, there are over 800,000 homeowners enrolled in this program.

An FHA mortgage is ideally suited to low to middle income households and was designed to help people in this income bracket qualify for a home loan and enjoy the benefits of home ownership.

In order to be enrolled in the FHA program, borrowers do need to meet certain criteria and apply for the loan through an FHA approved lender. The basic guidelines for participating in an FHA mortgage require the borrower to have a good credit history, enough funds for at least a 3% down payment and your total housing costs can not be in excess of 29% of your gross monthly income.

The specific requirements will vary depending on where you are looking to purchase a home. Your lender should be able to give you the exact requirements for your area. There are many FHA approved lenders and you are wise to shop around for the best rates.

If an FHA mortgage sounds right for you, you can speak to me, Arnold Cohen at the Mortgage Store, an FHA approved lender for more information and to start the application process.

Please call me with all of your mortgage needs.

Arnold Cohen
The Mortgage Store
303-488-5435

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