October 2, 2022 • 17 mins
Sometimes called the first time home buyers loan, FHA loans are one type of loan that you may come across during your research. We’ll take a closer look at what an FHA loan is and how it might benefit you as a first-time home buyer.
We'll cover the following topics:
- An Introduction to FHA Loans
- What types of FHA loans are there?
- What Are the Benefits of an FHA Loan?
- What additional fees are associated with an FHA loan?
- What are the income and loan limits for an FHA loan?
- What homes are eligible for an FHA loan?
- Are there other loan options with lower down payments than an FHA loan?
- Other types of FHA loans
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An FHA loan is a mortgage that is insured by the Federal Housing Administration (FHA), a government agency that is part of the U.S. Department of Housing and Urban Development (HUD). FHA loans are available to all kinds of borrowers, including first-time home buyers with limited credit histories. This type of loan is attractive to first-time home buyers because it has more flexible lending requirements than a conventional mortgage.
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Contact Information:
Philip Mastroianni – Loan Officer & Real Estate Agent
(949) 357-5029
Phil@HomeLoansPM.com
NMLS# 2141541
DRE# 02141890
Monica Mastroianni – Real Estate Agent
(951) 395-1848
Monica@HomesMM.com
DRE# 02099257
Legacy Homes Realty
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Philip (00:00):
Welcome new and returning listeners to the first
time home buyers podcast today,I want to talk about FHA loans.
They're one of the mostcommon loans used by first
time home buyers, and I'vedone a good number of them.
I'm Phil Mastroianni andI'm a licensed mortgage
loan originator as well as alicensed real estate agent.
I'm happy to help answer anyquestions you have head over
(00:22):
to loanpros.io for my contactinfo, as well as any additional
resources that you might want.
We're always adding more.
, my goal is to make youa more informed buyer.
So feel free to listen to allof our episodes, including
the basics of buying ahome from start to finish.
I think that one reallyhelps you understand
the overall process.
(00:48):
Buying a home is a big decision.
So if you're a first timehome buyer, which most of
my listeners are, you may befeeling overwhelmed by all
of the options out there.
One type of loan though,that you've probably
come across during yourresearch is an FHA loan.
I want to take a closerlook at what that is and
how it can benefit you asa first time home buyer.
(01:09):
So looking at whatis an FHA loan?
It's a mortgage that'sinsured by the federal
housing administration.
They're a government agency.
That's part of the usdepartment of housing
and urban development.
HUD.
FHA loans are availableto all kinds of borrowers,
including your first timehome buyers, people with
limited credit histories.
(01:30):
This loans really attractivethough, to first-time home
buyers, simply becauseit has more flexible
lending requirements thansay a conventional loan.
FHA loans are only offeredby approved lenders.
But most lenders have thisbecause they're like the
most common loan type toqualify for an FHA loan.
(01:50):
You'll typically have to havea credit score of at least 580.
And you have to demonstratethat you've got steady income
and employment history, FHAloans aren't available for those
with a credit score under 500.
Down payments for FHA loanscan be as low as three
and a half percent of thepurchase price of your home.
So that's great becausethat's a lower amount normally
(02:13):
than your conventionalloans, which usually are 5%.
For credit scores below 580.
So if you're between that500 and 580, you still can
qualify for an FHA loan.
But you're going to be requiredto make a larger down payment.
Usually of 10%.
This can vary on a lender bylender client by client basis.
So make sure you speakwith multiple lenders.
(02:34):
If you do have that lowercredit score, and you'd like
to see about getting thebest programs available.
Now FHA loans.
Aren't really just forfirst time home buyers.
In fact, anyone who meetsthe credit and income
requirements can apply.
Even if you've declaredbankruptcy, you've got a
home foreclosed in the past.
You can still beeligible for an FHA loan.
FHA loans though are onlygoing to let you have
(02:57):
typically one at a time.
So if you already have an FHAloan, you'll need to pay that
off before taking out another,there are cases where if you
have a job relocation or abig change in family size,
you can apply for a hardship.
But in general, FHA is reallyjust for your primary residence.
And it's not really used forsecond or investment homes.
(03:19):
Now I want to talk aboutthe different types of
FHA loans out there.
There's like eight, 10different types of FHA loans.
The most common is for yoursingle family, but they also
do an adjustable rate mortgage,home equity conversion mortgage,
which has reversed mortgages.
They do a streamlined refinance.
They also docondominium mortgages.
(03:40):
, disaster victims mortgage.
So for your home wasdestroyed in a disaster.
This actually have a wholeprogram specifically for that
energy efficient mortgages.
So if you're working on gettinga house in needing to upgrade
it to more energy efficient.
And then rehabilitationmortgages.
This is a section 203koften called a rehab loan.
(04:00):
these are really great.
If you're buying a home, that'sgoing to need a lot of work.
You can actually roll someof that into the loan itself.
And I'll talk moreabout that later.
So now what are theLike why would I want
to get that over adifferent type of loan?
Well, one of the biggestbenefits of an FHA loan is
it can help you get into ahome with less money down
(04:22):
and a lower credit score.
It's really helpful if youdon't have a lot of money
saved up for a down paymentand because the FHA loans
are backed by the government,many lenders are much more
willing to work with borrowers.
Who really wouldn't qualifyfor a conventional mortgage
Because of this, there'smore fees associated
with an FHA loan.
So I'm going to talk a littlebit about some of those fees.
(04:44):
The first of these fees ismortgage insurance premiums
and upfront mortgage insurance.
Mortgage insurance premiums arecharged monthly, and they're
going to be included in yourmonthly mortgage payment.
Now if you're putting 10%down or more, and Your minimum
is three and a half, butyou could put more down, but
if you're into two, 10% ormore, your mortgage insurance
(05:06):
premium is going to lastfor 11 years of your loan.
If you're puttingless than that down.
If you're doing, let's say threeand a half percent, maybe four
or five, six, your mortgageinsurance premium is going to
last the lifetime of the loan.
The only way to remove itis if you refinance Upfront
mortgage insurance is aone-time fee that's due.
(05:27):
When you close on your loanset, this is separate from
the other insurance that Iwas just talking to you about.
This is 1.75%, and it caneither be paid out of pocket
at closing, or you canfinance it interior alone.
I typically see that itgets financed into the loan.
So think of what yourpurchase price is.
And you're going to add 1.75%to that, and that's going to
(05:49):
add your overall principal.
There are a few thingsthat can impact your
mortgage insurance costs.
Your credit score, thesize of your down payment.
The higher your credit score,the lower your mortgage
insurance premiums will be.
Additionally, the moremoney you put down.
The lower yourpremiums could be.
So if you're able to saveup for a larger down you'll
(06:10):
likely end up paying less inmortgage insurance premiums.
The better your credit the lessyour market insurance premiums
again better credit more moneyin the bank more savings.
Let's talk about some ofthe income and the loan
limits for an FHA loan.
First of all, there'sno income limits when
it comes to FHA loans.
So you can make $50,000 a year,a hundred thousand dollars,
(06:31):
a million dollars a year.
It doesn't matter.
However, there are a loanlimits and the maximum loan
amount varies dependingon where you live.
And actually it's basedon the county, the
home you're purchasing.
Now the average loan limit in2022 is in about the mid 400
thousands, the limits range.
For one family propertiesaround 420,680 up to
(06:54):
a ceiling of 970,800.
It's all based on the costof living in location.
So if you're looking topurchase a higher priced home
that exceeds that FHA limit,you're going to have to apply
for either a conventionalmortgage instead of FHA loan.
Or you'll need to make up thedifference with more money down.
Now the fha loans also havea dti or debt to income
(07:16):
limit this is primarilybased on your credit score
and this affects your totalbuying power that you have.
If you don't know what a DTIis, it's really the ratio of
your debts to your income.
As a percentage.
I'll go into this morein another podcast where
we really dive into dtisdifferent ratios and how
(07:38):
they affect your buying powerSo if you are on that
lower end there of creditscores, between 500 and 579.
The maximum DTI.
Your debt to incomeratio is 43%.
If you have additional cashreserves, meaning money
in the bank, this may beable to be raised to 47%.
A loan officer like myselfcan definitely help you
(08:01):
determine exact numbersfor your situation.
For credit scores, 580 and abovethe maximum DTI is 50% though.
It does require that youhave a certain amount of
cash reserves, which againis money in the bank.
After your loan, closestto your credit can really
affect your buying power andalso how much money you're
going to have in the bank.
(08:21):
After the loan closescan affect that as well.
So we see that there's alimit on how much you can buy.
Of course, that's based on thelocation of the home you're
looking at and your debt toincome ratio, which is primarily
based on your credit score.
But what I get asked all thetime, What can I actually
buy with an FHA loan?
Are they limited?
(08:42):
What kinds of homes areavailable for fha loans?
So we'll look at what's calleda section 2 0 3 B financing.
That's your kind ofstandard FHA loan.
It's limited to one tofour unit properties, if
that's something that you'relooking for up to four units.
They have to be owner occupiedwhat that means is for an FHA
loan, you have to live there.
(09:04):
If you're on the loan, ifit's a multiunit home, like
at duplex, you're allowed torent out the other unit, but
you still have to live in oneyou can't rent out all of them.
The homes that are FHA eligible.
Can be detached or semi-detachedproperties, townhouses.
Row houses, individual unitsin an FHA approved condominium
(09:25):
and manufactured homes.
Now the house has also have tomeet HUD to minimum property
requirements, MPR and minimumproperty standards, MPS.
They also have to beappraised for least the
loan amount in order toqualify for an FHA loan.
An FHA appraisers going to goonsite and actually create an
appraisal detailing the home.
(09:46):
And its value.
Now there are someconditions like standing
water in the foundation.
Or excessive, damp situations,hazardous materials on site.
If there's defective systemsor pest infestations are
similar, they can all causeissues with the loan approvals.
They may need to be remediedor repaired prior to the
(10:06):
loan getting approved.
When the appraiser goes outthere, they're going to be
looking for a few things andthey're going to make sure
that the house has all of Uh,sufficient continuous supply of
safe water with enough pressurefor the size of the house.
It's going to have to havea working bathroom with
a toilet sink and eithera bathtub or a shower.
(10:27):
Enough room for a comfortableliving conditions and
heating hot water andelectricity for lighting
cooking and the equipmentnecessary to live there
so basically the house has to beable to be lived in right away.
If it doesn't have runningwater, if there's no
electricity, if there's nowhereto cook, there's going to
(10:48):
be a lot of issues tryingto get that loan approved.
As a home buyer, how are yousupposed to know if a home
meets these requirements andthat's where you really want to
lean on your real estate agent?
Typically their systemsare going to be able to
look up, to see if the homeis already FHA eligible,
according to the listing agent.
And they can usually get a goodidea of what types of things
(11:11):
are needed in order to passthe FHA appraisal in order
for that loan to go through.
So I would definitelyrely on your.
Real estate agent To reallyfilter out the home so
you're just seeing ones thatwill work with an fha loan
Now you're probably listeningand saying that seems like
there's a lot of restrictions.
Are there other programs thathave similar lower down payment
(11:31):
programs, maybe work with peoplewith not so perfect credit.
Well there are.
For example, a conventionalmortgage may require down
payment as little as 3%.
But keep in mind that therequirements for a conventional
mortgage are much more stringentthan those for an FHA loan, even
though the home requirementsaren't as stringent.
(11:52):
So you'll need to have a highercredit score and oftentimes
just more money in the bank.
There are also usda and va loanswhich are government backed and
have 0% down payment options.
USDA has income and locationrestrictions while VA loans
are only for veterans,active duty service
(12:13):
members and their spouses.
You definitely want to askyour loan officer about
the different types of loanprograms that they offer.
If you're a veteran.
The va loan programs are amazingif you're in a more rural
area the usda loans can be agreat option for you as well
Feel free to reach out to me ifyou'd like, I'm happy to answer
(12:34):
any questions that you have helppoint you in the right direction
Now want to talk a little bitabout other types of FHA loans.
So we talked about whatmost people are looking
at very standard.
single family homes, butI wanted to talk about
other types of FHA loans.
So one of those is anadjustable rate mortgage
(12:54):
often called an arm.
Arms are held to the samestandards as FHA loans, that
different qualificationsand property conditions.
But what they do feature isa lower initial interest rate
and that lower initial fixedrate period of 1, 3, 5, 7 or
10 years are followed by anannual interest rate adjustment.
(13:16):
What that basically meansis that you start out at
this lower interest rate.
But after that set periodof time the rates increase
This can be a really goodchoice if you know that you're
not going to be living in thathouse for more than a few years.
Usually that initialfixed rate period.
Otherwise you're going totypically want to refinance the
(13:37):
loan before that rate increasesThe next type of loan I
want to talk about is thesection 2 0 3 K rehab loan.
This loan allows you topurchase or refinance a
home that's in need ofrehabilitation or renovation,
and you get to include theimprovement costs in the
principal amount of the loan.
So here's some of thethings that, , you
(13:57):
could use that loan for.
So the first isstructural changes.
If you're converting asingle family home to
multifamily or the other waymulti-family to single family.
Modernization orfunctional improvements.
We see this a lot withkitchens bathrooms.
Elimination of health andsafety hazards, reconditioning
replacement, or installation ofplumbing or well septic systems.
(14:18):
, roofing gutters and floorwork significant landscape or
site changes, accessibilityfor persons with disabilities
and improvements for energyconservation or efficiency
Now if you're already inthe home and you want to
renovate you can actuallyrefinance through the
two or three k program.
No repairs, remodelingminimums are $5,000.
(14:41):
Your funding cannot be usedto build a new swimming pool.
I get that asked all the time.
No, you can't doa swimming pool.
It's considered a luxuryBut if you have an
existing swimming poolthat is in need of repair.
That can be done.
So.
Your repair work though istypically limited to six
months, but one really niceaspect of this is that you
(15:03):
can complete your own work.
You just can't be paidfor the labor time.
Now the next one is a homeequity conversion mortgage.
, this is often referredto as a reverse market.
It allows you if you're ofthe right age and you have a
lot of equity in your home.
That you can actuallytake that and get payments
sent to you from a lender.
(15:25):
It's a reallyinteresting program.
but the reverse mortgageborrowers receive these
payments, but there aresome requirements you
have to be 62 years old.
You have to either ownthe property completely,
or you have to have paiddown a considerable amount.
You have to occupy it.
And you can't bedelinquent on any kind
of debt or federal debt.
Now a reverse mortgage.
Isn't something I usuallytalk much about on a first
(15:47):
time home buyer podcast.
But I think it's good for youto kind of get a good idea of
what programs are out there.
And especially when you'rethinking long-term when you
reach that retirement age.
Really make sure you havesomething paid down or paid off.
It's all about creating thatgenerational wealth, but also
having something with equity.
(16:07):
That can help you intoyour retirement years.
The other thing is you mayactually be purchasing a home
that has a reverse mortgageon it and i want you to just
know as a buyer you don'thave to worry about that it's
just another type of loan orlien that's on the home and
it'll all get resolved throughescrow so when you purchase
(16:27):
it's just like a regular homePurchasing a home is a
major financial decision.
So it's important to educateyourself on all of your options
before committing to anything.
If you're looking fora type of loan that has
flexible requirements.
An FHA loan might be rightfor you with an FHA loan.
You could potentiallyqualify for a mortgage
with a lower credit scoreand down payment than with
(16:48):
a conventional mortgage.
And you may qualify whenyou didn't think you could.
As always speak to alicensed lender, have
them compare differentloan types and options.
Find the bestprogram fit for you.
I'm happy to help answer anyquestions you have head over to
loan pros.io for my contact infoas well as additional resources
(17:09):
that we add all of the timeI really do hope that this
podcast is helping make youa more informed home buyer,
again, feel free to reach out.
Let me know what youthink of these, or if
you have any questions.
I would love to help answerthem have a great day
Welcome new and returning listeners to the first
time home buyers podcast today,I want to talk about FHA loans.
They're one of the mostcommon loans used by first
time home buyers, and I'vedone a good number of them.
I'm Phil Mastroianni andI'm a licensed mortgage
loan originator as well as alicensed real estate agent.
I'm happy to help answer anyquestions you have head over
(00:22):
to loanpros.io for my contactinfo, as well as any additional
resources that you might want.
We're always adding more.
, my goal is to make youa more informed buyer.
So feel free to listen to allof our episodes, including
the basics of buying ahome from start to finish.
I think that one reallyhelps you understand
the overall process.
(00:48):
Buying a home is a big decision.
So if you're a first timehome buyer, which most of
my listeners are, you may befeeling overwhelmed by all
of the options out there.
One type of loan though,that you've probably
come across during yourresearch is an FHA loan.
I want to take a closerlook at what that is and
how it can benefit you asa first time home buyer.
(01:09):
So looking at whatis an FHA loan?
It's a mortgage that'sinsured by the federal
housing administration.
They're a government agency.
That's part of the usdepartment of housing
and urban development.
HUD.
FHA loans are availableto all kinds of borrowers,
including your first timehome buyers, people with
limited credit histories.
(01:30):
This loans really attractivethough, to first-time home
buyers, simply becauseit has more flexible
lending requirements thansay a conventional loan.
FHA loans are only offeredby approved lenders.
But most lenders have thisbecause they're like the
most common loan type toqualify for an FHA loan.
(01:50):
You'll typically have to havea credit score of at least 580.
And you have to demonstratethat you've got steady income
and employment history, FHAloans aren't available for those
with a credit score under 500.
Down payments for FHA loanscan be as low as three
and a half percent of thepurchase price of your home.
So that's great becausethat's a lower amount normally
(02:13):
than your conventionalloans, which usually are 5%.
For credit scores below 580.
So if you're between that500 and 580, you still can
qualify for an FHA loan.
But you're going to be requiredto make a larger down payment.
Usually of 10%.
This can vary on a lender bylender client by client basis.
So make sure you speakwith multiple lenders.
(02:34):
If you do have that lowercredit score, and you'd like
to see about getting thebest programs available.
Now FHA loans.
Aren't really just forfirst time home buyers.
In fact, anyone who meetsthe credit and income
requirements can apply.
Even if you've declaredbankruptcy, you've got a
home foreclosed in the past.
You can still beeligible for an FHA loan.
FHA loans though are onlygoing to let you have
(02:57):
typically one at a time.
So if you already have an FHAloan, you'll need to pay that
off before taking out another,there are cases where if you
have a job relocation or abig change in family size,
you can apply for a hardship.
But in general, FHA is reallyjust for your primary residence.
And it's not really used forsecond or investment homes.
(03:19):
Now I want to talk aboutthe different types of
FHA loans out there.
There's like eight, 10different types of FHA loans.
The most common is for yoursingle family, but they also
do an adjustable rate mortgage,home equity conversion mortgage,
which has reversed mortgages.
They do a streamlined refinance.
They also docondominium mortgages.
(03:40):
, disaster victims mortgage.
So for your home wasdestroyed in a disaster.
This actually have a wholeprogram specifically for that
energy efficient mortgages.
So if you're working on gettinga house in needing to upgrade
it to more energy efficient.
And then rehabilitationmortgages.
This is a section 203koften called a rehab loan.
(04:00):
these are really great.
If you're buying a home, that'sgoing to need a lot of work.
You can actually roll someof that into the loan itself.
And I'll talk moreabout that later.
So now what are theLike why would I want
to get that over adifferent type of loan?
Well, one of the biggestbenefits of an FHA loan is
it can help you get into ahome with less money down
(04:22):
and a lower credit score.
It's really helpful if youdon't have a lot of money
saved up for a down paymentand because the FHA loans
are backed by the government,many lenders are much more
willing to work with borrowers.
Who really wouldn't qualifyfor a conventional mortgage
Because of this, there'smore fees associated
with an FHA loan.
So I'm going to talk a littlebit about some of those fees.
(04:44):
The first of these fees ismortgage insurance premiums
and upfront mortgage insurance.
Mortgage insurance premiums arecharged monthly, and they're
going to be included in yourmonthly mortgage payment.
Now if you're putting 10%down or more, and Your minimum
is three and a half, butyou could put more down, but
if you're into two, 10% ormore, your mortgage insurance
(05:06):
premium is going to lastfor 11 years of your loan.
If you're puttingless than that down.
If you're doing, let's say threeand a half percent, maybe four
or five, six, your mortgageinsurance premium is going to
last the lifetime of the loan.
The only way to remove itis if you refinance Upfront
mortgage insurance is aone-time fee that's due.
(05:27):
When you close on your loanset, this is separate from
the other insurance that Iwas just talking to you about.
This is 1.75%, and it caneither be paid out of pocket
at closing, or you canfinance it interior alone.
I typically see that itgets financed into the loan.
So think of what yourpurchase price is.
And you're going to add 1.75%to that, and that's going to
(05:49):
add your overall principal.
There are a few thingsthat can impact your
mortgage insurance costs.
Your credit score, thesize of your down payment.
The higher your credit score,the lower your mortgage
insurance premiums will be.
Additionally, the moremoney you put down.
The lower yourpremiums could be.
So if you're able to saveup for a larger down you'll
(06:10):
likely end up paying less inmortgage insurance premiums.
The better your credit the lessyour market insurance premiums
again better credit more moneyin the bank more savings.
Let's talk about some ofthe income and the loan
limits for an FHA loan.
First of all, there'sno income limits when
it comes to FHA loans.
So you can make $50,000 a year,a hundred thousand dollars,
(06:31):
a million dollars a year.
It doesn't matter.
However, there are a loanlimits and the maximum loan
amount varies dependingon where you live.
And actually it's basedon the county, the
home you're purchasing.
Now the average loan limit in2022 is in about the mid 400
thousands, the limits range.
For one family propertiesaround 420,680 up to
(06:54):
a ceiling of 970,800.
It's all based on the costof living in location.
So if you're looking topurchase a higher priced home
that exceeds that FHA limit,you're going to have to apply
for either a conventionalmortgage instead of FHA loan.
Or you'll need to make up thedifference with more money down.
Now the fha loans also havea dti or debt to income
(07:16):
limit this is primarilybased on your credit score
and this affects your totalbuying power that you have.
If you don't know what a DTIis, it's really the ratio of
your debts to your income.
As a percentage.
I'll go into this morein another podcast where
we really dive into dtisdifferent ratios and how
(07:38):
they affect your buying powerSo if you are on that
lower end there of creditscores, between 500 and 579.
The maximum DTI.
Your debt to incomeratio is 43%.
If you have additional cashreserves, meaning money
in the bank, this may beable to be raised to 47%.
A loan officer like myselfcan definitely help you
(08:01):
determine exact numbersfor your situation.
For credit scores, 580 and abovethe maximum DTI is 50% though.
It does require that youhave a certain amount of
cash reserves, which againis money in the bank.
After your loan, closestto your credit can really
affect your buying power andalso how much money you're
going to have in the bank.
(08:21):
After the loan closescan affect that as well.
So we see that there's alimit on how much you can buy.
Of course, that's based on thelocation of the home you're
looking at and your debt toincome ratio, which is primarily
based on your credit score.
But what I get asked all thetime, What can I actually
buy with an FHA loan?
Are they limited?
(08:42):
What kinds of homes areavailable for fha loans?
So we'll look at what's calleda section 2 0 3 B financing.
That's your kind ofstandard FHA loan.
It's limited to one tofour unit properties, if
that's something that you'relooking for up to four units.
They have to be owner occupiedwhat that means is for an FHA
loan, you have to live there.
(09:04):
If you're on the loan, ifit's a multiunit home, like
at duplex, you're allowed torent out the other unit, but
you still have to live in oneyou can't rent out all of them.
The homes that are FHA eligible.
Can be detached or semi-detachedproperties, townhouses.
Row houses, individual unitsin an FHA approved condominium
(09:25):
and manufactured homes.
Now the house has also have tomeet HUD to minimum property
requirements, MPR and minimumproperty standards, MPS.
They also have to beappraised for least the
loan amount in order toqualify for an FHA loan.
An FHA appraisers going to goonsite and actually create an
appraisal detailing the home.
(09:46):
And its value.
Now there are someconditions like standing
water in the foundation.
Or excessive, damp situations,hazardous materials on site.
If there's defective systemsor pest infestations are
similar, they can all causeissues with the loan approvals.
They may need to be remediedor repaired prior to the
(10:06):
loan getting approved.
When the appraiser goes outthere, they're going to be
looking for a few things andthey're going to make sure
that the house has all of Uh,sufficient continuous supply of
safe water with enough pressurefor the size of the house.
It's going to have to havea working bathroom with
a toilet sink and eithera bathtub or a shower.
(10:27):
Enough room for a comfortableliving conditions and
heating hot water andelectricity for lighting
cooking and the equipmentnecessary to live there
so basically the house has to beable to be lived in right away.
If it doesn't have runningwater, if there's no
electricity, if there's nowhereto cook, there's going to
(10:48):
be a lot of issues tryingto get that loan approved.
As a home buyer, how are yousupposed to know if a home
meets these requirements andthat's where you really want to
lean on your real estate agent?
Typically their systemsare going to be able to
look up, to see if the homeis already FHA eligible,
according to the listing agent.
And they can usually get a goodidea of what types of things
(11:11):
are needed in order to passthe FHA appraisal in order
for that loan to go through.
So I would definitelyrely on your.
Real estate agent To reallyfilter out the home so
you're just seeing ones thatwill work with an fha loan
Now you're probably listeningand saying that seems like
there's a lot of restrictions.
Are there other programs thathave similar lower down payment
(11:31):
programs, maybe work with peoplewith not so perfect credit.
Well there are.
For example, a conventionalmortgage may require down
payment as little as 3%.
But keep in mind that therequirements for a conventional
mortgage are much more stringentthan those for an FHA loan, even
though the home requirementsaren't as stringent.
(11:52):
So you'll need to have a highercredit score and oftentimes
just more money in the bank.
There are also usda and va loanswhich are government backed and
have 0% down payment options.
USDA has income and locationrestrictions while VA loans
are only for veterans,active duty service
(12:13):
members and their spouses.
You definitely want to askyour loan officer about
the different types of loanprograms that they offer.
If you're a veteran.
The va loan programs are amazingif you're in a more rural
area the usda loans can be agreat option for you as well
Feel free to reach out to me ifyou'd like, I'm happy to answer
(12:34):
any questions that you have helppoint you in the right direction
Now want to talk a little bitabout other types of FHA loans.
So we talked about whatmost people are looking
at very standard.
single family homes, butI wanted to talk about
other types of FHA loans.
So one of those is anadjustable rate mortgage
(12:54):
often called an arm.
Arms are held to the samestandards as FHA loans, that
different qualificationsand property conditions.
But what they do feature isa lower initial interest rate
and that lower initial fixedrate period of 1, 3, 5, 7 or
10 years are followed by anannual interest rate adjustment.
(13:16):
What that basically meansis that you start out at
this lower interest rate.
But after that set periodof time the rates increase
This can be a really goodchoice if you know that you're
not going to be living in thathouse for more than a few years.
Usually that initialfixed rate period.
Otherwise you're going totypically want to refinance the
(13:37):
loan before that rate increasesThe next type of loan I
want to talk about is thesection 2 0 3 K rehab loan.
This loan allows you topurchase or refinance a
home that's in need ofrehabilitation or renovation,
and you get to include theimprovement costs in the
principal amount of the loan.
So here's some of thethings that, , you
(13:57):
could use that loan for.
So the first isstructural changes.
If you're converting asingle family home to
multifamily or the other waymulti-family to single family.
Modernization orfunctional improvements.
We see this a lot withkitchens bathrooms.
Elimination of health andsafety hazards, reconditioning
replacement, or installation ofplumbing or well septic systems.
(14:18):
, roofing gutters and floorwork significant landscape or
site changes, accessibilityfor persons with disabilities
and improvements for energyconservation or efficiency
Now if you're already inthe home and you want to
renovate you can actuallyrefinance through the
two or three k program.
No repairs, remodelingminimums are $5,000.
(14:41):
Your funding cannot be usedto build a new swimming pool.
I get that asked all the time.
No, you can't doa swimming pool.
It's considered a luxuryBut if you have an
existing swimming poolthat is in need of repair.
That can be done.
So.
Your repair work though istypically limited to six
months, but one really niceaspect of this is that you
(15:03):
can complete your own work.
You just can't be paidfor the labor time.
Now the next one is a homeequity conversion mortgage.
, this is often referredto as a reverse market.
It allows you if you're ofthe right age and you have a
lot of equity in your home.
That you can actuallytake that and get payments
sent to you from a lender.
(15:25):
It's a reallyinteresting program.
but the reverse mortgageborrowers receive these
payments, but there aresome requirements you
have to be 62 years old.
You have to either ownthe property completely,
or you have to have paiddown a considerable amount.
You have to occupy it.
And you can't bedelinquent on any kind
of debt or federal debt.
Now a reverse mortgage.
Isn't something I usuallytalk much about on a first
(15:47):
time home buyer podcast.
But I think it's good for youto kind of get a good idea of
what programs are out there.
And especially when you'rethinking long-term when you
reach that retirement age.
Really make sure you havesomething paid down or paid off.
It's all about creating thatgenerational wealth, but also
having something with equity.
(16:07):
That can help you intoyour retirement years.
The other thing is you mayactually be purchasing a home
that has a reverse mortgageon it and i want you to just
know as a buyer you don'thave to worry about that it's
just another type of loan orlien that's on the home and
it'll all get resolved throughescrow so when you purchase
(16:27):
it's just like a regular homePurchasing a home is a
major financial decision.
So it's important to educateyourself on all of your options
before committing to anything.
If you're looking fora type of loan that has
flexible requirements.
An FHA loan might be rightfor you with an FHA loan.
You could potentiallyqualify for a mortgage
with a lower credit scoreand down payment than with
(16:48):
a conventional mortgage.
And you may qualify whenyou didn't think you could.
As always speak to alicensed lender, have
them compare differentloan types and options.
Find the bestprogram fit for you.
I'm happy to help answer anyquestions you have head over to
loan pros.io for my contact infoas well as additional resources
(17:09):
that we add all of the timeI really do hope that this
podcast is helping make youa more informed home buyer,
again, feel free to reach out.
Let me know what youthink of these, or if
you have any questions.
I would love to help answerthem have a great day
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