What are the advantages of an FHA loan?

In many regions of the US, FHA loans have only recently come back into vogue, so a lot of real estate agents and mortgage originators aren't familiar with this great resource. The following are a just a few of the recent changes that have made FHA loans a more attractive option again for some consumers looking to buy a new home or refinance an existing one:

1) Congress passed the Stimulus Act of 2008. During the recent housing boom, home values surpassed FHA loan limits in many regions of the US. The recent enactment of this important legislation, however, increased FHA loan limits up to $729,500 in many high-cost regions of the US through the end of the year. FHA loan limits vary by county, so give us a call for loan limits in your area.

2) The FHA changed its appraisal and fee negotiating guidelines. In the past, many sellers steered clear of FHA loans because the appraisals were too strict and certain fees were non-negotiable. The FHA has greatly loosened these guidelines to make it easier for both buyers and sellers.

3) FHA loans are much cheaper now. Because FHA loans are federally insured, they tend to trade at a higher premium in the secondary market. This means lenders can often charge a lower rate.

Other FHA Benefits:

1) FHA loans are typically not as credit-score restrictive. Borrowers usually can have a lower score than with other products and still qualify for a good rate.

2) FHA loans require as little as 3.5% down, and allow a) Sellers to contribute up to 6% of the buyer's purchase price to close; b) Homeowners to take cash out up to 85% of the home's value; and c) Homeowners to consolidate first and seasoned second mortgages up to 97.75% of the home's value.

3) FHA loans allow down-payment assistance programs that are not seller-funded. *It is important to note that there are 22 ways in which FHA allows the funds for buyer contribution, including relative gifts and loans.

4) FHA loans allow non-occupying co-signers (i.e., mom/dad) to co-sign on the mortgage, even if the occupying signer (i.e. son/daughter) has no income. Note that specific restrictions apply.