FHA
Section 203(b) Mortgage Insurance for One-to-Four-Family Homes
Through this program, the US Dept. of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) insures mortgages made by qualified lenders to people purchasing or refinancing a home of their own. FHA does not make loans; FHA insures loans.
FHA's mortgage insurance programs help families become homeowners by providing qualifying standards that are in many cases easier to meet than for other types of mortgage loans. FHA mortgage insurance also encourages lenders to make mortgages to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, by protecting the lender against default on mortgages for properties that meet certain minimum requirements--including manufactured homes, single-family and multifamily properties, and some health-related facilities.
Section 203(b) is the centerpiece of FHA's single-family mortgage insurance programs-the successor of the program that helped save homeowners from default in the 1930s, that helped open the suburbs for returning veterans in the 1940s and 1950s, and that helped shape the modern mortgage finance system. Today, FHA One- to Four-Family Mortgage Insurance is still an important tool through which the Federal Government expands homeownership opportunities for first-time homebuyers and other borrowers who would not otherwise qualify for conventional mortgages on affordable terms, as well as for those who live in underserved areas where mortgages may be harder to get. FHA is actively involved currently to further provide assistance through programs like “FHA Secure,” a program designed to assist borrowers that can qualify to refinance out of a loan they have had trouble making payments on. These obligations are protected by FHA's Mutual Mortgage Insurance Fund, which is sustained entirely by borrower premiums. This program provides mortgage insurance to protect lenders against the risk of default on mortgages to qualified buyers. Insured mortgages may be used to finance the purchase of new or existing one- to four-family housing, as well as to refinance debt.
Why Choose FHA Section 203(b) loans?
- Get to closing faster – easier to qualify:
- No minimum credit
score is required
- Non-traditional credit
is acceptable
- Low down payment – 3.5%
on 203(b).
- Non-occupant
co-borrower is permitted
- Expanded qualifying
ratios
- No cash reserves
required
- No sales price limits
- No income limits
- Gift down payments OK from family
- Seller paid costs allowed
- No “declining market” issues
- Compatible with industry requirements on:
- Appraisal and repair
- Closing costs
- Lender insurance
- Automated Underwriting Systems (AUS) using FHA's TOTAL Scorecard
- Protections and advantages:
- Fully assumable
- Default assistance
- Non-credit qualifying
streamlines refinances
- Competitive interest
rates and lower premiums
- Certain liens may
remain unpaid
- Now features
“risk-based-pricing”
- Similar documentation
for comparable products
- No prepayment penalties
- FHA's loan products meet your borrowers' needs:
- Flexible buy and
repair with Streamlined 203(k) mortgage
- Reverse mortgage
(HECM)
- 95% cash-out
refinances
- Manufactured homes
- Multi-unit
Single family loan limits vary by county...get more info on FHA loans.
How much down payment is required?
If you figure 3.500% of the sales price as a minimum you will be fine.
What can sellers pay?
Sellers can pay up to a maximum of 6.000% of costs based on
the sales price.
Is an FHA loan harder to complete than a conventional loan, as related to processing times, qualifying, documentation, appraisal, or inspections?
Other than the required HUD documentation, and slightly
different credit standards the process is not much different than it is for
conventional loans. For consideration:
- 18”
crawl space required.
- Process for appraisal/inspection now the same as for conventional loans.
- No
requirement for water flow test; purity only.
- Pest & Dry Rot inspection is
not a requirement.
Contact your FHA approved and qualified lender.
As promised, here is some payment information based on a $175,000 purchase price:
Purchase Price $175,000
Minimum Down (3.5%) $ 6,125
Monthly P/I at *3.250% $ 775.00
Monthly MI $ 179.00
Taxes (Est.) $ 200.00
Insurance (Est.) $ 50.00
Total $1,204.00
Need more info? Get it here.
*3.414% APR, subject to change based on market conditions.
