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FHA

FHA EXCLUSIVITY

When applying for a mortgage, it’s important to note that the FHA will insure your home loan only if you plan to purchase or refinance a property that serves as your primary residence.

The Federal Housing Administration, generally known as “FHA,” provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories.

FHA insures mortgages on single-family and multifamily homes, including manufactured homes and hospitals.

It is the largest insurer of mortgages in the world. 

What is FHA Mortgage Insurance?

FHA mortgage insurance provides lenders with protection against losses due to homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner’s default. Loans must meet certain requirements established by FHA to qualify for insurance. 

How is FHA funded?

FHA is an insurance company. They do not lend money. You need to go to a qualified lender to get the loan.

 

FHA is the only government agency that operates entirely from its self-generated income and costs the taxpayers nothing. The proceeds from the homeowners’ mortgage insurance are captured in an account that is used to operate the program entirely. FHA provides a huge economic stimulation to the country in the form of home and community development, which trickles down to local communities in jobs, building suppliers, tax bases, schools, and other forms of revenue.

FHA Loan Limits

Limits based on location

Here’s what home buyers and mortgage shoppers need to know: 2019 FHA limits vary from one county to the next. They are based on the Home Price Index (HPI) and updated — or at least reviewed — every year.

In high-cost areas across the United States, FHA’s loan limit “ceiling” was increased to $726,525 for 2019. The housing agency also increased its “floor” for $314,827. These changes are the result of rising home values.

 

 
 
 

VA Home Loan Guarantee

VA Guarantee Home Loans

VA helps Servicemembers, Veterans, and eligible surviving spouses become homeowners. As part of our mission to serve you, we provide a home loan guaranty benefit and other housing-related programs to help you buy, build, repair, retain, or adapt a home for your own personal occupancy.

VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.

The Guarantee

  • The guarantee VA provides to lenders allows them to provide eligible persons with more favorable terms, including:
  • No-down-payment unless required by the lender or the purchase price is more than the reasonable value of the property
  • No private mortgage insurance premium requirement
  • The guarantee VA provides to lenders allows them to provide eligible persons with more favorable terms, including:
  • No-down-payment unless required by the lender or the purchase price is more than the reasonable value of the property
  • No private mortgage insurance premium requirement

VA rules limit the amount you can be charged for closing costs.

The seller may pay closing costs.

The lender can’t charge you a penalty fee if you pay the loan off early.

VA may be able to provide you some assistance if you run into difficulty making payments.

VA is a guarantee company. They do not lend money. You need to go to a qualified lender to get the VA loan.

Home Loan Eligibility

  • You must have satisfactory credit, sufficient income, and a valid Certificate of Eligibility (COE) to be eligible for a VA-guaranteed home loan. The home must be for your own personal occupancy.
  • Home loans can be used to:
  • Buy a home, a condominium unit in a VA-approved project.
  • Build a home
  • Simultaneously purchase and improve a home.
  • Improve a home by installing energy-related features or making energy-efficient improvements
  • Buy a manufactured home and/or lot.
  • To refinance an existing VA-guaranteed or direct loan for a lower interest rate.
  • To refinance an existing mortgage loan or other indebtedness secured by a lien of record on a residence owned and occupied by the veteran as a home.

Eligibility Requirements

Your length of service or service commitment, duty status, and character of service determine your eligibility for specific home loan benefits.

Qualifications

A veteran

A qualified non veteran

An unmarried surviving spouse

National Guard Members and Reservists with six years of service

Certificate of Eligibility

Proof to a lender that a veteran may apply for a VA-guaranteed home loan. Obtained by most lenders from the VA electronically or by the veteran submitting a Department of Defense Form (DD 214) Active Duty discharge document to the lender.

Certificate of Reasonable Value (CRV)

A statement of value issued by the Department of Veterans Affairs after appraisal by a VA approved lender. If the CRV does not match or exceed the contract purchase price, the veteran applicant may void the contract or choose to pay any excess cash at closing.

You should also know that:

You don’t have to be a first-time homebuyer

You can reuse the benefit.

VA-backed loans are assumable, as long as the person assuming the loan qualifies (They do not have to be a veteran or qualified non -veteran)

VA Loan Assumption rules

VA must approve the buyer and assumption agreement.

The original borrower remains liable for the loan unless VA approves a release of liability.

Non-veterans may assume the loan.

Interest Rate Reduction Refinance Loan (IRRRL): also called the Streamline Refinance Loan, can help you obtain a lower interest rate by refinancing your existing VA loan.

Native American Direct Loan (NADL) Program: helps eligible Native American Veterans finance the purchase, construction, or improvement of homes on Federal Trust Land or reduce the interest rate on a VA loan.

The program, also known as Section 184 is a home mortgage specifically designed for American Indian and Alaska Native families, Alaska Villages, Tribes, or Tribally Designated Housing Entities.

Adapted Housing Grants: help Veterans with a permanent and total service-connected disability purchase or build an adapted home or to modify an existing home to account for their disability

 

VA and FHA loans are for owner-occupied properties.

A lender bases the amount they will loan on the appraised value.

 
 

USDA/rural loan programs

The USDA Loan is a mortgage option available to some rural and suburban homebuyers. USDA Home Loans are issued by qualified lenders and guaranteed by the United States Department of Agriculture (USDA).

USDA Home Loans are particularly favorable to those living in rural or low-income areas.

USDA Loans offer $0 money down, lenient eligibility requirements, and competitive interest rates – due to the loan being guaranteed by the USDA.

USDA mortgages stand alone as the only mainstream zero money down program available to borrowers that have not served in the military.

Eligible borrowers will be hard-pressed to find a home loan program that offers more favorable terms.

 

Farm Service Agency (FSA)

Farm Ownership Loans

“we keep America’s agriculture growing.”

No current or previous farm ownership requirements and 100 percent financing available

FSA direct farm ownership loans are a valuable resource to help farmers and ranchers become owner-operators of family farms, improve and expand current operations, increase agricultural productivity, and assist with land tenure to save future generations’ farmland.

All FSA direct loans are financed and serviced by the Agency through local Farm Loan Officers and Farm Loan Managers. The funding comes from Congressional appropriations as part of the USDA budget.

USDA/rural loan programs

Rural Housing Service

USDA’s Rural Housing Service offers various programs to build or improve housing and essential community facilities in rural areas. 

We offer loans, grants, and loan guarantees for single- and multi-family housing, child care centers, fire and police stations, hospitals, libraries, nursing homes, schools, first responder vehicles and equipment, housing for farm laborers, etc. more.

We also provide technical assistance loans and grants in partnership with non-profit organizations, Indian tribes, state and federal government agencies, and local communities.

Our partners and we are working together to ensure that rural America continues to be a great place to live, work, and raise a family.

 
 
 

Help Buying a New Home

Learn about government programs that make it easier to purchase a home.

Programs to Help You Pay for a Home

The Department of Housing and Urban Development (HUD) offers a variety of federal programs that may be able to help you purchase a home if you qualify for assistance:

FHA Loans and HUD Homes

If you’re a homebuyer, the Department of Housing and Urban Development (HUD) has two programs that may help make the process more affordable.

Homeowner Voucher Program

If your family is low-income or in public housing and you want to buy a home, the Department of Housing and Urban Development (HUD) Homeownership Voucher Program may help you meet your monthly mortgage payments and other home expenses.

 
 

Grants

Community Development Block Grant

The Community Development Block Grant (CDBG), one of the longest-running programs of the U.S. Department of Housing and Urban Development, funds local community development activities with the stated goal of providing affordable housing, anti-poverty programs, and infrastructure development. CDBG, like other block grant programs, differ from categorical grants, made for specific purposes, in that they are subject to less federal oversight and are largely used at the discretion of the state and local governments and their subgrantees.

first-time homebuyer grant

(or first home owners grant) is a grant specifically for/targeted at those buying their first home — perhaps a starter home. Like other grants, the first-time buyer does not hold an obligation to repay the grant. In this respect, it differs from a loan and does not incur debt or interest. Grants can be given out by foundations and governments. Grants to individuals can be a cash subsidy

 
 
 

Non-Government Loans

Conforming loans are also sometimes called “qualified mortgages,” or QM.

Conforming loans are those which adhere to Fannie and Freddie’s guidelines. That is, conforming conventional loans only go to those borrowers who are most likely to pay back their loans — i.e., those who make 20% down payments, have a good credit score, a reliable income, etc. They also do not exceed a certain amount.

Conventional Loan

Conventional loans are provided by lenders who are not insured by the FHA or VA. These mortgages have an added risk and therefore require higher down payments.

A loan with no government insurance or guarantee, secured by real estate.

Jumbo Loan

A jumbo loan is a mortgage with an amount that exceeds the limits set by Fannie Mae and Freddie Mac. A jumbo loan is a good option if you’re looking to buy an expensive, luxury home, can afford a large down payment, and have a great credit score.

 
 
 
 

Bridge Loans

  • A bridge loan is short-term financing until a person or company secures permanent financing or removes an existing obligation.
  • Bridge loans are short-term, typically up to one year.
  • Homeowners can use bridge loans toward the purchase of a new home while they wait for their current home to sell

TEMPORARY LOAN

A temporary loan, also called interim financing, bridge loan, swing loan, or gap loan, is used when funds are needed for short periods of time to complete a real estate transaction. A typical situation where a temporary loan may be used is when a seller is selling one house and plans to use the proceeds from the sale to buy another house.

 
 
 

Owner Financing

PURCHASE MONEY MORTGAGE

The mortgage that a seller takes back as part of the sale price of a property.

State government sets rates for the interest that cannot be exceeded — called the usury rate.

These seller mortgages may not be subject to the usury limits that are set by state law, so you need to verify that information in your state.

Mortgages made by lenders (not sellers) are subject to these limits.

Land contracts, installment contracts, and purchase money mortgages are seller financing

In a seller financing, the vendor will most likely use a Trust Deed because it’s easier to foreclose. 

An investor will buy time to purchase an investment property through the use of an option contract.

 
 
 
 
 

Reverse Mortgages

Home Equity Conversion

Mortgages for Seniors (HECM)

The homeowner must be 62 years or older. Turning the equity in a primary residence into cash-free income.

A reverse mortgage is a special type of home loan that lets you convert a portion of your home’s equity into cash.

The equity that you built up over years of making mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the mortgage’s obligations.

You can also use a HECM to purchase a primary residence if you can use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

 
 
 

Home Equity Loans

Home equity loans

A home equity loan is a type of loan in which the borrower uses the equity of his or her home as collateral.

Participation Mortgage. A loan where the lender participates in the development and/or selling of the property.

 
 
 

Blanket Mortgage

A blanket mortgage is a loan that covers more than one piece of property. It sometimes is used to finance a subdivision development. Say, for example, that a builder buys six lots on which he plans to build houses and sell them.

The builder may want to use a blanket mortgage to finance the purchase because it usually comes with a partial release provision. A partial release is a provision that allows the lien to be removed separately from each parcel as it is sold to a buyer, and the bank is paid a portion of the loan amount.

Partial Release Clause

Used by sub-dividers and developers with a blanket loan. Subdividers will get one large loan on a large parcel. The loan is called a Blanket Mortgage.

 
 
 

Package Mortgage

A package mortgage is a loan that covers real estate and personal property being sold with the real estate. The buyer of a house in which furniture is being included in the sale may want to apply for a package loan. For example, this loan can be used to purchase a furnished vacation home.

 
 
 

Construction Loan

A construction loan is made to finance a construction project. A typical case is when someone who owns property hires a builder to build a house. Money from the loan is released to the builder at certain points as the project progresses. At the end of the project, the loan generally is converted to a conventional mortgage.

 
 
 

Wraparound Loans

A wraparound mortgage, more commonly known as a “wrap,” is a form of secondary financing to purchase real property.
The seller extends to the buyer a junior mortgage, which wraps around and exists in addition to any superior mortgages already secured by the property.

Under a wrap, a seller accepts a secured promissory note from the buyer for the amount due on the underlying mortgage plus an amount up to the remaining purchase money balance.

 
 
 
 

Subprime Mortgage

Subprime Mortgage

Some lenders grant subprime mortgages to borrowers with low credit scores who don’t usually qualify for most other home loans. These loans tend to have very high-interest rates to protect lenders if the borrower defaults.

 
 
 

Joint Loan

When you enter a mortgage agreement with a co-borrower who is equally responsible for repaying the loan, it is called a joint loan. Having another credit score and income contributing to the loan application can help qualify for a home loan.

Cosigner

A co-signer can help you qualify for mortgages by signing the loan application with you. Co-signers have no interest in owning the property, but their credit score, income, and assets will count towards getting you a lower interest rate.
Co-Borrower

Having co-borrowers join your loan application, their income, assets, and credit score can help you qualify for a loan and get lower interest rates. Co-borrowers are equally liable to pay back the loan.

 
 
 
 

Second Mortgage

 
 

Shared Equity Mortgage

The shared equity mortgage allows for a share of the profit on the property to be given to someone else in return for help purchasing the property. A relative, investor, or lending institution may agree to provide funds for a down payment or help with the mortgage payment. When the property is sold, a predetermined share of the profit is given to the person who provided the financial help.

 
 
 

Sale Leaseback

A sale-leaseback isn’t a mortgage but can be a source of project financing and a means of obtaining the equity in a property. Usually used in commercial property situations, an owner-occupant uses a sale-leaseback to sell the building but agrees to remain in the building under a lease. The new owner has a tenant, and the old owner has gotten his money out of the building to use.