FHA HOME LOAN GUIDE

 Making Home Ownership Dreams Become a Reality 

FHA LOANS 
FHA does not make direct loans. In the event of a default, FHA insures mortgage loans made by approved lending institutions. FHA's analysis of the transaction takes into consideration the applicant's income, past credit history, work history and ability to save and manage financial affairs. Each applicant is considered individually, as no two families have exactly the same situation. Family obligations, responsibilities, future prospects, motivation and spending patterns all differ widely. 

ADVANTAGES OF FHA LOANS 
1) Low down-payment/less cash from borrower.
2) Less stringent loan underwriting guidelines. 
3) Fully assumable (with qualifying).
4) No prepayment penalty. 

ELIGIBILITY REQUIREMENTS 
FHA financing may be used by any qualified person, whether a US citizen or not. However, the property must be the occupying borrower's principle residence. The borrower must also have a social security number. 

FHA PROGRAMS 
The Three FHA Programs Are: 
1) 30 year fixed/level payment, where the monthly principal and interest payment remains the same for the life of the loan. 
2) One year ARM (adjustable rate mortgage), which can fluctuate based on the index (1 year Treasury Bill), has a 1% annual cap and a 5% lifetime cap. 
3) GPM (graduated payment mortgage) which allows the borrower to qualify at a lower rate but requires a larger down-payment and has negative amortization. 

FHA APPRAISALS 
FHA uses the same appraisals for all programs. The appraisals (or Conditional Commitments) are done by FHA assigned/approved appraisers and sets forth FHA's estimate of value. If the appraisal is at a value lower than requested, a reconsideration of value may be requested by sending FHA recent comparable indicating a higher value, or the buyer may pay the additional difference. 

CO-SIGNERS 
FHA allows a borrower to use a non-occupying co-signer for purposes of qualifying for the loan. The co-signers income, assets, liabilities, and credit history are included in the determination of creditworthiness. The co-signer must be a blood relative, or for unrelated individuals, documented evidence of a family-type, long standing substantial relationship not arising out of the loan transaction. 

FHA MORTGAGE INSURANCE 
Mortgage insurance is required on all FHA loans. The insurance is collected by the lender and paid to FHA who in turn reimburses lenders in the event of a loan default. MMI and MIP are the two different types of FHA mortgage insurance. Mutual Mortgage Insurance (MMI) - MMI is collected monthly on approved condominiums. Insurance is paid on the remaining balance of the loan only. Therefore the payment will decrease gradually over the life of the loan. Mortgage Insurance Premium (MIP) - MIP is a one time fee of 2.25% of the loan amount that applies to Single Family Residences (SFR) and Planned Unit Developments (PUD). This fee can be 100% financed and added to the base loan. SFR's and PUD's also pay monthly MMI. 

BUYERS COSTS: Down Payment;  Loan Origination Fee (1% of the base loan amount);  Escrow Fee;  Appraisal Fee;  Credit Report Fee;  Recording Fees;  ALTA Lenders Title Policy;  Property Tax Proration and Reserves;  MMI Impounds (2 months);  MIP (can be 100% financed & added to the base loan);  Fire Insurance and Reserves (14 months/ for SFR's only);  and Per Diem interest on new loan, based on closing date 

SELLERS COSTS:  Escrow Fee;  Sub-Escrow Fee*;  Tax Service*;  Revenue Tax Stamps ($1.10 per $1,000.00 sale price);  Standard owners Title Policy;  Proration of Property Taxes;  Payment of outstanding assessments etc.;  Structural Pest Control Inspection & Repairs;  Pay off existing Trust Deeds & Liens;  Broker Fees;  Association Transfer Fees*;  Buyer Loan Processing Fee*;  and Buyer Loan Document Fee* 

**REMEMBER** 
Down payment, closing costs and impounds required for closing must be paid from the buyers own funds or can be a non-repayable gift from a relative. FHA does not allow the buyer to pay certain costs and therefore those costs must be paid by the seller (see *items under sellers costs). If any other costs, other than those FHA non-allowable costs, are paid by the seller on behalf of the buyer, FHA requires that the buyer's loan be reduced by a corresponding amount, saving the buyer very little money, because their down payment is increased. 

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