FHA Loans

 

Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment (3.5 percent) and you can have less-than-perfect credit. Borrowers who cannot afford a traditional down payment of 20 percent or can't get approved for private mortgage insurance should look into whether an FHA loan is the best option for their personal scenario. Another advantage of an FHA loan is that it can be assumable, which means if you want to sell your home, the buyer can "assume" the loan you have. People who have low or bad credit, have undergone a bankruptcy or have been foreclosed upon may be able to still qualify for an FHA loan. Recently, FHA loans have become increasingly popular with Maine home buyers. 

 

FHA mortgage loans are issued by federally qualified lenders and insured by the U.S. Federal Housing Authority, a division of the U.S. Department of Housing and Urban Development. Currently, FHA loans are one of the most popular loan options in Maine, accounting for nearly 40% of loan originations in 2012.

 

FHA loans are an attractive option, especially for first-time homeowners in Maine:

  • Generally easier to qualify for than conventional loans
  • Credit scores down to 620
  • 3.5% Down Payment
  • Gifts from acceptable sources allowed for down payment and closing costs
  • Seller allowed to pay closing costs (limits apply)
  • Historically Low 30 and 15 year fixed interest rates
  • Statutory loan limits apply

We also offer the popular FHA Streamline Refinance for Maine homeowners who currently have an FHA Mortgage Loan. Often, these refinances require no appraisal and no closing costs. We are proud to provide the lowest FHA Refinance Rates in Maine.

 

Other requirements for FHA financing:

  • Must have a steady employment history or worked for the same employer for the past two years
  • Must have a valid Social Security number, lawful residency in the U.S. and be of legal age to sign a mortgage in your state
  • Must make a minimum down payment of 3.5 percent. The money can be gifted by a family member.
  • New FHA loans are only available for primary residence occupancy
  • Must have a property appraisal from a FHA-approved appraiser (lender to order)
  • Your front-end ratio (mortgage payment plus HOA fees, property taxes, mortgage insurance, home insurance) needs to be less than 31 percent of your gross income, typically. You may be able to get approved with as high a percentage as 46.99 percent. Your lender will be required to provide justification as to why they believe the mortgage presents an acceptable risk. The lender must include any compensating factors used for loan approval.
  • Your back-end ratio (mortgage plus all your monthly debt, i.e., credit card payment, car payment, student loans, etc.) needs to be less than 43 percent of your gross income, typically. You may be able to get approved with as high a percentage as 56.99 percent. Your lender will be required to provide justification as to why they believe the mortgage presents an acceptable risk. The lender must include any compensating factors used for loan approval.
  • Minimum credit score of 640 for maximum financing with a minimum down payment of 3.5 percent.
  • Typically you must be two years out of bankruptcy and have re-established good credit. Exceptions can be made if you are out of bankruptcy for more than one year if there were extenuating circumstances beyond your control that caused the bankruptcy and you've managed your money in a responsible manner.
  • Typically you must be three year out of foreclosure and have re-established good credit. Exceptions can be made if there were extenuating circumstances and you've improved your credit. If you were unable to sell your home because you had to move to a new area, this does not qualify as an exception to the three-year foreclosure guideline.

Property needs to meet certain standards: Also, an FHA loan requires that a property meet certain minimum standards at appraisal.

Learn more about FHA loans. (Department of Housing and Urban Development)

 

 

 

The FHA Streamline Refinance is a special mortgage product, reserved for homeowners with existing FHA mortgages. Homeowners with conventional mortgages via Fannie Mae or Freddie can’t use it. FHA Streamline Refinances are the fastest, simplest way for FHA-insured homeowners to refinance their respective mortgages.

 

The FHA Streamline Refinance program’s defining characteristic is that it does not require a home appraisal. Instead, the FHA will allow you to use your original purchase price as your home’s current value, regardless of what your home is actually worth today.

 

In this way, with its FHA Streamline Refinance program, the FHA does not care if you are underwater on your mortgage. In fact, the program encourages underwater mortgages. Even if you owe twice what your home is now worth, the FHA will refinance your home without added cost or penalty.

The FHA allows for unlimited loan-to-value with its Streamline Refi program — a huge help to FHA homeowners. Except for this “no appraisal” benefit, the FHA Streamline Refinance is very much like other loan products. It’s available as a fixed rate or adjustable mortgage; it comes with 15- or 30-year terms; and there’s no prepayment penalty to worry about. Another big plus is that FHA mortgage rates are as low with the Streamline Refinance program as with “regular” FHA loans.

 

The FHA’s main goal is to reduce its overall loan pool risk. Therefore, it’s number one qualification standard is that homeowners using the Streamline Refinance program must have a perfect payment history stretching back 12 months. 30-day, 60-day, and 90-day lates are not allowed. Furthermore, loans must be current at the time of closing.