FHA Mortgages and VA Mortgages

FHA loans

FHA loans are insured by the Federal Housing Administration, an agency within the U.S. Department of Housing and Urban Development (HUD). FHA does not loan money, but it provides lenders protection through mortgage insurance (MIP) in case the borrower defaults on his or her loan obligations. Available to all buyers, FHA loan programs are designed to help creditworthy low-income and moderate-income families who do not meet requirements for conventional loans. The are also programs, that you may have heard about, that are designed to help those in certain situations, such as FHA Secure.

If you are considering buying a home or refinancing and will be borrowing more than 90% of the purchase price or value of the home, right now an FHA loan is hard to beat. With the losses that the private mortgage insurance or "PMI" companies have been taking over the last year from all the foreclosures, they have been forced to increase their rates to get the required PMI. That's where FHA steps in to save the day. Since FHA loans are insured by the government and not private insurance companies, the "MIP" or mortgage insurance premium, has stayed the same. Which on a $150,000 mortgage can save you at least $50 dollars a month and possibly as much as $150 a month. That's huge!

The FHA loan of today is much different than in the past.

A lot of the restrictions that made FHA loans somewhat overbearing before, have for the most part, been eliminated. The seller is no longer required to pay certain costs, which used to cause sellers to shy away from buyers that were doing FHA financing. The traditional FHA inspection has been done away with and only the FHA appraisal is needed.

But, I don't have the 3% downpayment....

That's okay, in most cases, if your realtor knows that you're doing an FHA loan before you make an offer on a house, they can negotiate with the seller to have them participate in one of the several downpayment assistance programs, that will provide you with a down payment grant for the required 3% downpayment for the FHA loan. You read that correctly, that's the equivalent to a 100% FHA mortgage!

Some of the other benefits of FHA financing:

• Part of the closing costs can be financed.
• Lower monthly mortgage insurance premiums and, under certain conditions, automatic cancelation of the premium.
• More flexible underwriting criteria than conventional loans
• FHA limits the amount lenders can charge for some closing cost fees (e.g. the origination fee can be no more than 1% of mortgage).
• Loans are assumable to qualified buyers.

VA Loans

VA guaranteed loans are made by lenders and guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase of a home.  A VA loan can be a very good loan if you're willing to jump through a few extra hoops along the way and can take as much as 45 to 60 days. VA loans provide 100% financing without any PMI or MIP, but they do however, require a funding fee, upfront. The funding fee is 2.2% of the loan amount for someone using their benefits for the first time, and then goes up to use your VA mortgage benefits after that. Call us, and we can discuss your eligibility and the exact amount of the funding fee. Seller's may sometimes shy away from buyers with VA loans, due the closing costs that they may have to pay for the veteran.

Other benefits of a VA loan include:

• Closing costs are comparable and sometimes lower - than other financing types.
• No private mortgage insurance requirement.
• Right to prepay loan without penalties
• The Mortgage can be taken over (or assumed) by the buyer when a home is sold.
• Counseling and assistance available to veteran borrowers having financial difficulty or facing default on their loan.

The VA funding fee may be paid in cash by the buyer or seller, or it may be financed in the loan amount.

A VA loan can be used to buy a home, build a home and even improve a home with energy-saving features such as solar or heating/cooling systems, water heaters, insulation, weather-stripping/caulking, storm windows/doors or other energy efficient improvements approved by the lender and VA.

Veterans can apply for a VA loan with any mortgage lender that participates in the VA home loan program. A Certificate of Eligibility from the VA must be applied for by the lender and may take anywhere from 5 days to 45 days to get. The traditional green form is no longer used. We will need your DD-214 to process the request.