Episode 006 1995 - 96 Season

| Plumbing Top Out | Window Treatments (design) | Electrical Rough-In | Toilet Repair | Steel Frame Rough-In | Dimmer Switch Installation | FHA Loans | |

To order a Video Tape, call 1-800-TO-BUILD and ask for Episode #006.


Mortgage Moment - FHA Loans

Michael Holigan: Starting this week, we're going to start talking about the different mortgage loan programs that are available. We're going to start with a FHA, the Federal Housing Administration, one of the most popular type loans. Now this is insured by the government. They don't make the loan, but they do ensure the lender in case there's a problem with the loan. So, they're a little more flexible. One of the advantages is expanded ratios. They're more flexible on that. You can afford more home with a 29/41 percent ratio than you can with a conventional loan. Two, is eased income underwriting. That means they're much easier to work with underwriters working on how much income you need, how your ratios are fitting together. They're a little more flexible. No reserves required. Now you need cash reserves when you move into a house. You have your down payment, your pre-paids, your closing cost, but then they want to see a couple month's worth of payments in your checking account. That's not required with FHA. Now watch the mortgage companies. Most underwriters do require it, but the FHA says no, that's not required. Next is gift funds allowed. Your family is allowed to help you out with your down payment and your closing costs and your pre-paids. Now they're not allowed to loan you that money, but they are allowed to give you that money, give you a gift to make those payments with. Lower down payment - FHA 2 1/2 to 5 1/2 percent down. Now that's lower than most conventional loans. There are some new conventional loans that are pretty low. That's still a great loan. Attractive adjustable rate mortgage loans, my favorite is a FHA adjustable rate mortgage loan. Low, low monthly payments, low caps, the rate doesn't move a lot, very safe loan. Next, the seller is allowed to contribute up to six percent. Now the seller could be your builder or someone selling you a used home. They can pay up to six percent towards buying you down a lower interest rate, or helping out with the closing costs. Never pass any money between the seller and the buyer that the mortgage company doesn't know about. Make sure that it's all up front, on paper, everybody can see it. You don't want to commit loan fraud and go to jail trying to buy a house. So make sure everyone sees it. Allowed to pay up to six percent to help you get into a house. The disadvantages: anything associated with the government, there's more paperwork. That's the way FHA's loans are too. One FHA loan at a time. If you bought a house with a FHA loan, you'd like to lease it out and buy another house, you can't buy that next one with a FHA loan. Only one at a time. You sell the first one, you can go ahead and get another FHA loan. Limited loan amount by region. That's determined out of Washington, D.C. They take the average price in each area, determine what the FHA limit will be. That can be anything. Depends on what they say. Mortgage insurance premium - anytime you have a low down payment loan, you're going to have to pay some mortgage insurance. You pay part of this up front with FHA, and that insures the lender that if you ever leave that house and they don't get paid off on their mortgage, they're not going to take a big, big loss. Part of that's insured and you pay for part of that insurance. 

Episode 006 1995 - 96 Season

| Plumbing Top Out | Window Treatments (design) | Electrical Rough-In | Toilet Repair | Steel Frame Rough-In | Dimmer Switch Installation | FHA Loans | |

To order a Video Tape, call 1-800-TO-BUILD and ask for Episode #006.