In a nutshell, Federal Housing Authority (FHA) mortgages are for low to medium income borrowers who likely will not qualify for a conventional loan. Unfortunate events happen all the time which cause people to be ineligible for conventional loans. Entrepreneurial efforts die for reasons beyond the control of the business owners.
Irreconcilable differences end in divorce and homes either need to be sold or refinanced in the name of the person remaining in the house. People face medical situations that alter their lives entirely. These types of events and so many more affect the fiscal lives of homeowners every day.
At Nationwide Mortgage, we are here to help lighten your burden by finding solutions to your money problems. When your mind is less cluttered with distractions regarding your finances it leaves you free to focus on other challenges. For those impacted by a loss of income or an excessive strain on income, an FHA loan in Fort Lauderdale can often be a very attractive option for refinancing.
FHA loans are backed by the federal government which reduces the amount of risk for the lender enabling them to make loans available to low and middle-income Americans who might not otherwise qualify for conventional financing. If the borrower defaults, the mortgage is paid
to the lender by the FHA program. The FHA, though, is not a lender, and an FHA loan is not a free pass. The borrower pays for that guarantee in the form of up-front mortgage insurance premiums and subsequent monthly mortgage
insurance premium payments.
Even with the requirement of mortgage insurance premiums, there are some very compelling reasons to consider an FHA refinance.
- They are a loan that is possible regardless of the amount of equity in the home or the amount of debt the borrower has.
- A damaged credit score is not as much an issue as with conventional mortgages.
- Banks and other lenders are willing to give FHA loans at more competitive interest rates because the government is behind the loan.
- While conventional loans typically require at least 20% down, an FHA loan, depending on the borrower’s debt ratio and credit score, can require as little as 3.5% down.
- Up-front expenses can be lowered by a reduction in closing costs. An FHA loan allows a seller, builder, or another third party to help pay closing costs if they wish to expedite the sale of the property. Also significant is the fact that an FHA loan allows the closing costs to be spread over the life of the loan, again lessening the up-front, out-of-pocket expenses.
- Credit scores as low as 500 have been acceptable for an FHA compared to 733 for a conventional loan.
One important note to keep in mind is that the property you are purchasing with an FHA loan must be your primary residence and not a vacation home or investment property.
While getting an FHA loan is significantly easier than qualifying for a conventional loan, very poor credit, and a few other items will usually disqualify an applicant for an FHA loan.
- Chapter 7 bankruptcy in the last two years can be problematic. However, consistent, timely payments in other areas for a year or more may curry favor with a sympathetic lender especially if extenuating circumstances can be shown to be the cause for the bankruptcy.
- Foreclosure within the last three years can also be an obstacle. Again, consistent payments for a year in other ways like utilities can sometimes work in an applicant’s favor particularly if the foreclosure was the result of involuntary job loss or another loss of income which was out of your control.
- Delinquency on a federal debt like taxes or student loans will definitely disqualify an applicant for an FHA loan.
Whether switching from a conventional loan to an FHA loan will be in one’s best interest depends on the amount of equity in the home and the amount of the refinance mortgage with mortgage insurance premiums. At Nationwide Mortgage we help each customer determine the best option for their situation. Come see us today to see if you qualify for an FHA loan.