Sumathi Narayanan Realty's Blog
If you’ve been considering taking the next step toward homeownership, you’ve likely heard about FHA loans. Offered by the Federal Housing Administration (hence, “FHA”), these loans are great for a number of people hoping to purchase a home but who don’t have a large down payment saved.
There are many misconceptions about FHA loans since they’re often advertised by large, private mortgage lenders but are technically a government program. In order to clear up some of the confusion, we’ve provided answers to some frequently asked questions regarding FHA loans.
Read on to learn about FHA loans and how they might help you purchase a home.
Who issues an FHA loan?
FHA loans aren’t issued by the government. Rather, they’re issued by private lenders but insured, or “guaranteed,” by the government.
Since lenders want to make sure they’ll see a positive return from lending to you, they typically want you to have a high credit score and a large down payment (typically 20%). However, not everyone is able to meet those requirements. In this situation, the FHA is able to help you acquire a loan by giving your lender a guarantee.
Are there different types of FHA loans?
Yes. In fact, there are nine distinct types of loans guaranteed by the FHA. These include fixed rate mortgages, adjustable rate mortgages, refinance loans, reverse mortgages, VA loans, and more.
What do you need to qualify for an FHA loan?
It’s a common misconception that you need to be a first-time buyer to qualify for an FHA loan. However, if you have previously owned a home that was foreclosed on or if you’ve filed for bankruptcy, the foreclosure and bankruptcy have to be at least three years old.
You’ll also need to demonstrate a stable employment history, usually including two years of employment with the same employer.
Finally, the FHA will ask you for your current and previous addresses, the last two years tax returns, and the W-2 forms from any of your recent jobs.
What is the most I can borrow with an FHA loan?
The FHA sets mortgage limits on loans depending on the state and county you’ll be living in. For a single-family home, the limit ranges from $275,000 to $451,000. So be sure to check the limits for your state and county.
Can you refinance an FHA loan?
Refinancing a loan is a great way to receive a lower interest rate or to shorten the term of their mortgage to save in the total number of interest payments. In fact, the FHA typically only allows refinancing when it will result in lower interest payments on a loan.
What is the minimum credit score needed to qualify for an FHA loan?
While you don’t need excellent credit to qualify for a loan, the FHA will require you to have a score of at least a 580. You can check your score for free online from a number of companies, such as Mint or Credit Karma. Be aware, however, that scores vary between credit bureaus. So, it’s a good idea to check your FICO score once per year, which is the score used by mortgage lenders.
Architecturally speaking, many home buyers have very definite ideas about their preferred house style.
Whether it stems from a sense of practicality or positive childhood memories, few house hunters are "on the fence" when it comes to the number of stories their ideal house should have.
Perhaps you're one of those people who grew up in a two-story house and wouldn't feel right sleeping down the hall from the kitchen and family room. Some people just prefer their sleeping quarters to be on the second floor!
Although it's a matter of personal preference, there are certain practical aspects to buying a ranch-style or traditional rambler house.
Less stair climbing: While this is an advantage that seniors typically value the most, stairs can be a burden anyone -- especially when you're lugging suitcases, boxes of books, or that heavy new futon you wanted to put in the guest room.
You can probably also recall countless evenings when exhaustion set it, and the last thing you felt like doing was climbing a long, winding staircase to get to your bedroom. (Okay, well maybe it's not "winding," but you get the idea!)
Then, of course, there are those times when you haven't been to the gym in a few months -- make that years -- and your home treadmill has turned into more of a clothes rack than an exercise machine! Although going up and down stairs a few times a day can help counteract the effects of a sedentary lifestyle, sometimes stairs can feel like they're more trouble than they're worth! That would definitely be the case if you have any physical conditions or health problems which make climbing stairs painful or medically unsafe. (Your physician can provide helpful advice on the latter.)
Home maintenance: If you hate getting up on tall ladders to paint your house or clean your rain gutters, owning a one-story home is a solution. Since home maintenance and repairs can often end up costing a bundle, it may make sense to consider doing your own exterior house painting. Although it's time consuming, messy, and sometimes a bit strenuous, painting your own house can potentially save you thousands of dollars in labor costs. Naturally, you'll still need to buy your own paint, brushes, rollers, and other supplies, but the amount of money you can save on labor is substantial.
Personal safety: If there's a fire or other emergency and you need to quickly evacuate your home in the middle of the night, a first-floor window can be safer and less scary than having to exit your house though a second-story window. While this type of dire situation is unlikely and will hopefully never happen to you, it's one of many factors to consider when comparing and contrasting ranch-style homes with other architectural styles.
If you do opt for a two-story (or three-story) architectural style, such as a colonial, craftsman, Tudor, Victorian, or farm house, it's especially important to have a fire escape ladder on hand, as well as a working knowledge of its proper use.
Missing a mortgage payment is not the end of the world. Many lenders are more than ready to work out a payment plan if you’re going through a rough patch or budgetary crisis. However, you may end up doing more harm than good to your credit and home ownership if you don’t contact your mortgage lender as soon as the financial need arises.
Below are things to remember about a late mortgage payment.
1. Mortgages Come with a Grace Period
Even if you pay one day or five days after the due date, it still might not be considered late since many lenders offer a grace period of about five to fifteen days. If you want to know about your specific grace period, contact your lender for grace period information.
2. A Late Fee Will Appear
If your payment is delayed, then it will most likely incur a late-payment fee. You can expect to pay the late fee in your next mortgage payment. Work with your lender to see if you can avoid a late fee by setting up an automatic payment method or if there are other clauses in your contract to have the fee waived in extreme circumstances.
3. Damage to Credit Score
A damaged credit score is one of the adverse effects of a late mortgage payment. Your payment history is of uttermost importance as it can affect your ability to secure financing of any sort in the future. Your lender usually reports your payment history, and if you are thirty days behind, your credit score may feature “late 30” next to the loan. This mark could drastically hurt your overall FICO® score.
4. Suffer Drastic Measures
When you suffer delinquent payment beyond 90 days, your lender automatically considers you in default on your loan. If left without a written waiver or payment arrangement, they may start to take foreclosure actions against you, which could lead to more public actions and eviction from the home. There are other things that can be done to retain your home, however. Bankruptcy affords the ultimate protection until your debts can be assessed and discharged by the government but should be a last option since it can remain on your credit report for ten years.
5. The Account Goes to Collection
Your account can go into collection if you are behind your mortgage payment. In that case, you will receive a phone call or a letter from your lender about the late fee and that your account is being sent to a collection agency.
Every borrower’s situation is different, depending on credit score and payment history. If possible, avoid falling short of your mortgage payment. The earlier you make the due payment, the better it is for you, but if you’re unable to, set up an arrangement with your lender.
Still have more questions about mortgages and how to successfully nail down the right price for you? Contact me, and I’ll point you in the right direction.
If you're an apartment renter ready to take the plunge into home ownership, there are a lot of reasons to be excited! Owning your own home does bring with it additional work and responsibilities, but the feeling of pride that accompanies it makes it all worthwhile!
Once you get used to the idea that "the buck stops here" and that there's no landlord to handle repairs and maintenance any more, it won't take long to get into the rhythm of being an established property owner. Here are a few tips to help ensure that your first experience with home ownership is a satisfying one.
- Get a good real estate agent. A real estate professional can provide you with valuable guidance, advice, and information about houses you're considering in your desired neighborhoods and price ranges. A buyers' agent can help you avoid many of the potential pitfalls of buying your first home and help you stay within budget. They'll assist you in clarifying your priorities and work on your behalf to find homes that meet your requirements. A service-oriented agent will not only point out the positive aspects of houses you're considering, but they'll also discuss ideas for adapting the home to your specific needs and lifestyle.
- Hire an experienced property inspector. A seasoned home inspector can take a close look at the condition of the house and property you're considering and help make sure there are no major structural defects, safety issues, or operational problems with the home's systems and components. Although every property inspector approaches their job a little differently, their inspection service should include everything from the roof and foundation to the plumbing, electrical, and HVAC systems. They may also report to you on the condition of the home's insulation, its exterior, and any existing or potential drainage problems on the property. Certain aspects of the house may be excluded from the inspection if it's difficult or unsafe to gain access to them. A top-notch home inspector can also provide useful insights into repairs that need to be made on the house. As a side note, professional property inspectors are often members of The American Society of Home Inspectors and follow the organization's Standards of Practice.
- Visit a lot of different houses for sale before making a final decision. It also pays to have a checklist with you to keep track of how each house stacks up to your requirements and expectations.
Does your real estate agent have what it takes to help you streamline the process of buying or selling a home?
Ultimately, when it comes to choosing a real estate agent, it pays to hire a housing market expert. With this real estate professional at your side, you can accelerate the homebuying or home selling cycle and improve your chances of achieving your desired results.
There are many signs that a real estate agent is a housing market expert, and these include:
1. A real estate agent keeps you up to date about the housing market.
Ideally, you should be able to find a real estate agent who will go the extra mile to keep you up to date about housing market trends. This housing market professional can help you make informed decisions throughout the homebuying or home selling journey.
In addition, the right real estate agent should have no trouble differentiating between a buyer's market and a seller's market so you can plan accordingly. He or she will assess housing market data regularly, and as such, be better equipped than other housing market professionals to help you stay ahead of the competition.
2. A real estate agent possesses extensive industry experience.
If you're on the lookout for a real estate agent, it certainly is beneficial to hire a housing market expert with comprehensive industry experience.
A real estate agent with extensive industry experience will know how to handle tough homebuying or home selling situations. That way, he or she can help you identify and overcome myriad hurdles as you try to buy or sell a house.
Furthermore, a real estate agent who possesses in-depth experience likely has plenty of confidence. This housing market professional should be able to help you alleviate stress and remain calm, cool and collected at each stage of the homebuying or home selling journey.
3. A real estate agent can answer any of your housing market questions.
Navigating the homebuying or home selling journey can raise many questions. Fortunately, the right real estate agent will be ready to answer your housing market questions at any time.
A real estate agent who knows the ins and outs of the housing market can provide you with the insights that you need to succeed, regardless of the current real estate sector's conditions. Plus, he or she will listen to your homebuying or home selling concerns and offer honest, unbiased recommendations to help you accomplish your goals.
Lastly, it may prove to be worthwhile to hire a real estate agent who is a great communicator. This housing market professional will be able to explain complex real estate concepts in simple terms, making it easy for any homebuyer or home seller to make the best possible decisions.
Ready to buy or sell a house? Collaborate with a real estate market who is a housing market expert – you'll be happy you did. This housing market expert can help you proceed with confidence and accomplish great things throughout the homebuying or home selling journey.