An FHA mortgage is a home loan insured by the Federal Housing Administration. The FHA does not provide money directly to borrowers; rather they insure the mortgage against a default. This makes Federal Housing Administration borrowers particularly attractive to lenders. The lenders know that if the borrower fails to pay, they can come after the Administration for their money.

Borrowers who pay a down payment of less than 20% of the principal of their home are expected to buy private mortgage insurance (PMI).

FHA History

The Federal Housing Administration was conceived in 1934. In 1965, it joined with the Department of Housing and Urban Development (HUD). During its lifetime, the Federal Housing Administration has insured more than 30 million mortgages. About 800,000 people who currently hold mortgages have a loan through the Federal Housing Administration. The Federal Housing Administration operates from the proceeds of PMI purchased by home buyers whose down payment was less than 20% of the principal of the home.

Who Qualifies for this Loan?

When most people think of a Federal Housing Administration loan, they think of the first time home buyer. Certainly, the Administration enables first time home owners, but an Administration loan may be an option for you even if you have bought a home before.

Requirements for qualifying for a Federal Housing Administration Loan include
*A good credit record
*Money for a down payment (you can pay as little as 3.5% down if your credit score is 580 or better)
*Housing costs that equal no more than 29% of your gross annual income (if you are a first time home buyer, this rule ensures that you do not purchase too much house and get into trouble with debt)

Types of Federal Housing Loans

By far, the most popular type of loan is the fixed rate loan (203B). This loan allows for a low down payment (3.5%), and also allows moneys used for closing to come from gifts.

Other popular loans include the Rehab Loan (203K) which helps borrowers who purchase property that requires repairs before anyone can live in it. The Adjustable Rate (251) is also a popular loan plan.

If you believe you may qualify for this time of loan, find a Federal Housing Administration lender and asked to be pre-approved for a home loan.

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A rate lock is a short-term agreement for a lender to “hold” an interest rate on a home while the buyer negotiates the actual sale.

Rate Lock Requirements

Requirements for rate locks vary from state to state. Within states, individual lenders often set their own individual policies and practices. For instance, a broker may require a signed contract before he or she agrees to lock in a rate.

Some brokers will make a verbal agreement to lock in a rate but will not put that agreement in writing. Mortgage experts suggest that buyers decline offers of oral lock-in contracts. If something goes wrong and the buyer needs to sue the lender, it can be very difficult to prove that an oral contract existed.

Rate Lock Terms

A rate can only be locked in for a certain number of days. The most common period is 30 to 60 days, although rates can be locked in for as long as 120 days. If there is a problem with the sale and the locked-in rate expires before the sale is negotiated, the buyer will usually have to accept the loan at the prevailing interest rates or look elsewhere for a better deal.

Unpredictable Interest Rate

When a buyer attempts to lock in an interest rate on a mortgage, he or she is most concerned about interest rates climbing. Sometimes, however, the opposite happens and rates actually go down. In this case, the buyer may be locked in at a rate far higher than the prevailing rates. Even among mortgage experts, locking in rates has the reputation for being a guessing game and a gamble.

A cautious buyer may want to pay extra money for what is known as a “float down” locked rate. In this case, the buyer can lock in the rate at the time he or she signs the contract, however, if the rates go down, the buyer’s lock-in rate similarly decreases. If the rates go up, the lender abides by the original lock-in rate.

Used carefully, rate locks can be an important tool for keeping the interest rates on a loan as low as possible.

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Before you become a first time homebuyer, it’s a good idea to stop and ask yourself a few questions. Depending on your circumstances, renting for a few more years may be the sound financial move to make.

How Long Do You Plan to Stay in the Home?

If you’re taking out a 30-year purchase mortgage but you only plan on staying in the home two or three years, you’re probably better off not purchasing. Why? Because originating a mortgage involves a down payment and closing costs. Even in the best case scenario, it will be at least five or six years before you have built up enough equity in your home to make owning more profitable than renting.

How Fast Are Your Rent Prices Increasing?

If you plan on staying in the area for a while, and your landlord raises the rent by several percentage points each year, you will benefit financially from becoming a first time home buyer.

How Fast Are Home Values Increasing?

If the home values in your area are static, or worse, declining, it’s probably not a good idea to invest at this time. You may be unable to sell the property when you’re ready to move, or you may get back considerably less than what you put into it.

Can You Find a Home You Like?

This may seem like an obvious question, but some people are so eager to buy home, any home, that they don’t stop to think about where they actually want to live for the next several years of their life. Before you take out a purchase mortgage, take some time and think about features in the house that matter most to you. If you have young children, for instance, you’ll want to consider the school district the house is in. If you use mobility equipment, you’ll want to make sure there aren’t too many stairs. Don’t commit your hard-earned money until you find a house that you truly like.

Are You Handy?

One cost that many people forget to consider when it comes time to buy home is the cost of repairs. If you rent, repairs are covered. If you buy, it will be up to you to pay to fix that leaky faucet or purchase that new air conditioner. If the home you are purchasing is an older home or a fixer-upper, and you’re not very good with fixing things, you may end up sinking more money into home repairs than the house itself is worth. Again, in this case, continuing to rent might be your better option.

Should you be a homeowner? Only you can answer that question. There are circumstances where buying a home is a very sound financial move to make, and circumstances where renting is probably your best choice.

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Is it wiser to rent a home or to take out a mortgage and purchase one? In the past, conventional wisdom has held that buying is more sound financial decision. In today’s market, however, there are some cases where you might actually come out ahead renting your home. When making the rent versus buy decision, there are some factors you should take into account:

Length of Time in Home

Before you buy, think about how long you plan to stay in the house or condo you’re purchasing. Taking out a new mortgage has a lot of upfront costs including a hefty down payment and loan origination fees as well as other closing costs. If you will only be living in the house for a few years, you won’t build enough equity to make back your initial investment. Renting is probably smarter. If you want to see how renting compares with different mortgage deals, check one of the free online renting vs. buying calculators.

Rental Increases

If your landlord raises the rent on your apartment by several percent every year, it may make more sense to buy. Again, a financial calculator can help you explore this.

House Price Increases

Before you purchase a house, make sure you know the overall trend of house values in the neighborhood. If the houses are losing value, you’re more likely to come out ahead by renting. If the houses are gaining value quickly, it may be a good investment to buy.

Tax Advantages

When you are ready to sell your house, you will not be charged taxes on the income unless it is over $500,000 ($250,000 for a single person).

Repair Costs

When you’re renting, the landlord has to foot the bill to fix the plumbing or repair the roof. Once you buy, that responsibility shifts to you. If you’re buying an older house or a fixer-upper, make sure to take repair costs into account when you’re making the rental/buy decision.

There is no simple answer to the question of renting vs. buying. You must weigh all the different factors and make a decision that is appropriate for your unique circumstances.

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With interest rates at all time lows, many homeowners are attempting to refinance their mortgage, and with the economy in a spiral it makes perfect sense to refinance or seek a home loan.

ItÕs also important to remember the many factors that go into the process. Below we have highlighted some things you need to consider before going through application process.

The Costs: Going into a refinance or new home loan you must calculate and consider qualification, closing costs Ð interest rates, future plans, and current needs. This all should be the first factor that goes into the decision.

Keep in mind legal, tax and financial guidelines are always changing, and depending on your personal situation you may want to expedite a transaction if you are close to not qualifying for a loan. For example, lenders often raise a minimum score requirement that depending on your credit history could cost you thousands extra.

Check both individual state and federal guidelines that may differ drastically with varying qualifications. Existing mortgage borrows may chose to refinance or consolidate loans seeking low interest monthly rates.

Be sure to accurately calculate monthly payment savings, finding truly how much you might save. What is your true interest rate savings? Consider closing costs that could be significant.

Another big key is educating yourself, know the types of mortgages are out there including Fixed Rate, Adjustable Rate, VA Loans, Interest Only Mortgages, First-Time Buyer Loans, Equity and Reverse Mortgage Loans among others.

What is your future plan? Do you have two kids going to college or do you need a new car? Do you expect a raise at work? Is your employer laying-off and times are uncertain at work? Do you have a daughter getting married soon?

Financial mortgage loan solutions that fit your unique circumstances are important. Take your time to weigh each factor donÕt let anyone rush you into a situation

Remember, Keep things organized with a determined approach exploring new loans and refinancing by carefully doing your homework.

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Within three days of receiving your loan application, your lender must give you a good faith estimate that clearly describes the terms and fees for mortgage you selected. As of January, 2010, HUD provided a standard three-page form to make it easier for borrowers to compare loans.

Basic Information

Among other things, the GFE indicates the amount of the loan, the interest rate, whether the loan is a fixed-rate or adjustable-rate mortgage, your estimated monthly payment, loan origination fees, points (interest pre-paid at the closing), and total estimated closing costs.

The mortgage rate listed on the estimate is subject to change unless you have made an arrangement with the lender to “lock in” a specific rate, but per HUD guidelines, the fees are guaranteed for ten days from the date the GFE was issued.

Check each of these items carefully when you receive your GFE and make sure the terms of the loan are what you and the lender originally agreed upon. For instance, if you and the lender discussed a fixed-rate mortgage, make sure the good faith estimate does not indicate a mortgage rate that varies from month to month. The estimate is a valuable tool to protect consumers against misunderstandings and even unethical loan practices like bait-and-switch (offering one type of mortgage but actually providing another that has less favorable terms for the borrower).

Comparison Charts

Another helpful feature of the good faith estimate is its two comparison charts.

The first is called the tradeoff table. This chart shows how the terms of your loan would be altered if you went with either lower or higher settlement charges, or closing costs. Typically lower settlement charges mean a decreased out-of-pocket expense but slightly higher interest rates and payments in the years to come. Higher settlement charges will cost you more at closing but will result in decreased payments over the life of the loan.

The final comparison chart is the “shopping cart” which compares the costs of similar loans from different lenders.

Paying close attention to the basic information and the comparison charts on an estimate can help you make sure you are getting the mortgage plan that makes the most sense for you financially.

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Most people who are in the market for a new car would never dream of going to only one dealership, yet those same people often neglect to shop around to find the home loan that works best for them. If you are in the market for a new home loan, try the following tips to get the best deal possible.

Decide What “Best Mortgage” Means to You

Certainly, you want to find the best mortgage rates, but don’t forget to consider other mortgage terms as well. Would you prefer a fixed-rate or an adjustable-rate? A 15-year term or a 30-year term? A small or a larger down payment? Think about all of your options and decide what makes the most sense for you before going loan shopping.

Get Your Credit Score Up

You’ll get the best mortgage terms if your credit score is 700 or above. If it falls below 700, you may not be eligible for the most favorable terms or the exact loan that you want. You can improve your credit score by challenging incorrect information on your credit reports, paying off excess debt to improve your debt-to-income-ratio, making any remaining loan payments on time, and not taking out any new lines of credit in the days before you complete a home loan application.

Contact Several Different Lenders and Brokers

A lender is an entity that loans you money directly, like a bank. A broker is an entity that provides your information to several lenders and fields mortgage offers. It’s a good idea to check with several lenders and brokers to get an idea of the types of loans and mortgage rates available to you.

Use a Mortgage Calculator to Compare Offers

Many online sites offer free calculators to help you figure out what your monthly payments will be under certain terms. Once you have contacted a few lenders and/or brokers, enter the figures into an online calculator to see how the different offers compare.

Negotiate for More Favorable Mortgage Terms

Don’t be shy about negotiating with lenders. For instance, if you would rather work with Bank A, but your best offer comes from Bank B, don’t hesitate to contact the loan officer at Bank A and give him or her a chance to match Bank B’s terms. You’ll find lenders especially willing to negotiate for your business if your credit is good.

Shopping for the best terms on a new home loan can be a little intimidating. Decide what terms make the most sense on your budget, compare offers, and negotiate with lenders to get the best deals.

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The historic foreclosure level is no secret these days, and many homebuyers are seeking to find the best deal possible. Buying a foreclosed property might just be the offer of a lifetime! 

With interest rates at historic lows and refinancing prices low, passing up on a chance to buy a foreclose home might just come back to hunt you. Not only can foreclosed properties save you up to 25% or more on propertyÕs market value, it might also offer advantages like no money down with immediate move-in terms.

Just like any purchase you want to know where to search for the best possible deal and where to locate it. Below are a few ideas that will help you save time and locate that foreclosed house your looking to buy.

1. Online Bank Public Notices and Classifieds. Prior to a foreclosure, the bank or lending institution will formally announce it in advance. These Bank Public Notices are published in a legal section of a local newspaper. They generally fall under two categories: “Notice of Default” or “Lis Pendens”. Listed are the property’s address and the current owner’s name available. Using this information will help you have all the initial information needed to proceed.

2. Property Auctions. Foreclosure auctions are also popular ways to announce opportunities. Typically, as you look to purchase property. You might come across advertisements in local or business newspapers or online. These notifications are also available upon subscription. Further, experienced home buyers may contact lending institutions directly to find out about any auctions scheduled in the near future. Be sure to confirm scheduled auction dates due to delays or even canceled.

3. Find Contacts with a Bank’s “Real Estate Owned” (REO). Property Department is also a method used by savvy home buyers looking for foreclosed properties. By doing this you can get a chance to buy a foreclosure that failed to be sold at an auction. In other words, you are buying the property directly from the bank. Although, this process can be time consuming, if you carefully make your listings and gather the details on each prospective property Ð you can increase your profits, long-term.

4. Internet Research. When looking for home buying opportunities lots of resources exist online. Consider saving time by subscribing to one of the many paid services that provide you with timely updates on foreclosures. The fee for these services is generally low and could potential lead you to additional properties with bigger profit margins.

Purchasing a foreclosed property might just give you the best opportunity to become a homeowner, and could even cheaper than renting. Either way, now is the time to take advantage of the current financial incentives the economy has brought on us!

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Its hard to look at todays rates and not wonder if its time to refinance your mortgage. You also might be asking yourself if you have the credit ranking, and financial ability to do so. This economy has affected everyone, and having a lower mortgage payment might be what the financial doctor ordered.

The refinancing process can be a little overwhelming, even for those with mortgages. That’s why we want to help get you ready, making the process simpler and less stressful.

Here are 5 things that will take you less than an hour to gather, and will give you a leg up when applying for your mortgage application:

1. Locate Mortgage Documents. Believe it or not, this is the number one time waster in refinancing a mortgage. Most of us don’t know the basics of our mortgage, other than our monthly payment. However, your mortgage broker needs several more critical pieces of information to search out the best mortgage deal for you. They need your current mortgage rate, the type of rate (adjustable or fixed), how long it is financed, I could go on and on, but here’s the deal find these things:

* Your copy of the mortgage closing package
* The last couple of monthly mortgage statements
* Property tax documents (probably filed with your taxes)

2. Check Credit Reports. Your credit score is going to be the centerpiece of your mortgage qualification. Good credit scores get lower rates and better terms and bad credit scores get higher rates and worse terms. That’s just the way it works. Therefore, it’s critical that you know where you stand so you can either fix it or at least go into the process with your eyes open. Either way you will be able to use this information (your credit score and report) to compare online offers and fix any mistakes before you ever talk to a mortgage broker.
Here are some reputable websites to get quick and cheap copies of all three of your credit reports:

* TrueCredit
* MyFICO
* CreditReport.com

3. Check Property Value. Home values have all gone in the tank over the last few years. Assuming you home has appreciated or held its value from the time you bought it will set you up for clinical depression. So check what the market estimate your home is worth–cry a little, have a glass of wine, freak your neighbors out–then get over it and strategize how to overcome that challenge. A good mortgage broker will be a good guide (and therapist) to minimize this negative.
Here are some good places for quick (probably inaccurate, but gives you a ballpark) estimates:

* Zillow
* Trulia
* Cyberhomes

Check all. You will see that they vary wildly, but looking at recent home sales in your area will get you in the ballpark and avoid later panic or disappointment.

4.  Go Over Income Statements (w2, 1099,etc.) Okay, this is where you have to be honest with yourself before you get connected with a mortgage broker–Do you have a good, stable job?

Your broker is going to ask for the last couple of months of pay stubs or last two years of income tax returns. Do you have these? Do they show consistent income? Will they support your current debt (credit cards, car payment, school loans) and your mortgage? If you answered, “Yes,” then you are off to the races and will be able to qualify for most conventional mortgage options.

If you answered, “No,” then you are not out of the game for refinancing your mortgage; however, you probably need to be prepared for more unconventional approaches, like a loan modification.

5. Check your bank account. Is there money in there? It sounds like a silly question, but it’s very important. The bank or broker is going to be looking for documentation (bank statements) that indicate you have reserves (back-up savings) and enough cash to pay for closing costs. Make sure you have the funds in a checking or savings account that you can show. Dramatic changes in account balances during the mortgage process only makes mortgage people nervous. Get the money in there now and leave it there until you have refinanced your mortgage.

If you have completed this mortgage refinance checklist than you should be in great shape to begin the application process. Next, contact your trusted lender and soon enough you will be on your way to saving money on your monthly payment.

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You said you wanted to refinance your mortgage, right? Well, be prepared, there are many options available, and unlike your favorite cap, there not all one size fit all.   This excellent list, which was researched carefully, includes everything, even the fine print of each term. Before you make a call to a mortgage professional check out the option that best fits your situation.

Below are the primary options available to you when considering refinancing your mortgage

1. Loan Type
2. Description
3. Who It’s For
4. Main Advantages
5. Main Disadvantages
6. Fixed Rate Mortgage

A loan with fixed principal and fixed interest payments for the life of the loan

1. Best for borrowers who desire a more predictable principal and interest payment throughout the life of the loan

2. The fixed principal and interest portion of the mortgage payment stays the same for the life of the loan with no unexpected rises

3. The fixed principal and interest portion of the mortgage payment will not go down when interest rates go down

4. In addition, the portion of the monthly payment that includes taxes and insurance may fluctuate from year to year

Adjustable Rate Mortgage (ARM)

Generally, a lower interest rate to start, which translates to a lower payment. But the interest rate adjusts over time to either a higher or lower interest rate over time.

1. Borrowers who are able to budget for a slightly less predictable interest rate and monthly payment.

2. Take advantage of lower initial interest rates with adjusted lower monthly payments. When interest rates fall, the borrower may not need to refinance as the interest rate on their mortgage falls accordingly.

3. The principal and interest portion of the mortgage payment may be unpredictable at times; payments go up when interest rates rise.

Fixed/ARM Hybrid

Integrates both fixed-rate and adjustable-rate mortgages; typically has a lower interest rate than a traditional fixed rate mortgage. The initial payment period is fixed for a specific term, after the interest rate and principal will adjust over the remaining term of the loan.

1. Best for borrowers who are less financially established at the start of a loan, but plan to have more financial stability after several years. Also, for those who plan to move or refinance early.

2. Gives the borrower a chance to establish financial stability before they must manage less predictable payment amounts. Requires some planning and financial advancement.

Fixed/ARM Hybrid, Interest First (Interest Only)

Payment of “interest only” reduces your monthly payment compared to a more traditional type mortgage where your payment includes both principal and interest.

1. Best for borrowers who are less financially established at the start of a loan, but plan to have more financial stability after several years. Also, for those who plan to move or refinance early.

2. The borrower’s interest-only payments may be tax deductible. In addition, a prepayment of principal may reduce the next monthly interest-only payment.

3. There is no scheduled principal reduction during the interest-only period. In addition, when the loan enters the amortization period (or the scheduled payoff period), there will be higher payments because the loan is paid off in a short period.

Balloon Mortgage

1. Often lower interest rate than a traditional fixed rate mortgage.

2. First time buyers who plan to move after a few years, or someone whose career forces them to move often. Lower interest rates and simple plan for specific types of borrowers.

3. After the initial balloon period (3, 5 or 7 years), borrowers may be required to pay off the remaining loan in one lump sum which usually requires refinancing.

Low and No Down Payment Loan

Several options of low or no down payment programs available. Some of these loans are best suited for borrowers with excellent credit who want to preserve their assets. Other loans are best for first-time home buyers with income limitations or area restrictions.

1. Borrowers with excellent credit who want to continue their good credit record, first time buyers, and buyers with income limitations.

2. Borrowers with little to no savings for up-front costs and down payments can still secure a mortgage.

3. Low or no down payment loans usually require private mortgage insurance and/or higher interest rates.

LIBOR Interest-Only Alternate Loan

1. Generally offers an interest rate lower than other adjustable rate loans. Payments are interest-only to start, then principal and interest. “LIBOR” stands for London Interbank Offering Rates.

2. Beginning borrowers and borrowers seeking a larger-than-normal loan and expect to be able to increase payments after several years.

3. Historically, the rate remains below U.S. Treasury-based ARMs. Allows more types of borrowers to qualify.

4. After a predetermined number of years, monthly payments will increase and interest rates will adjust annually.

My Community Mortgage (MCM)

1. A special mortgage program for borrowers making less than the average area income (HUD median income), living in specific areas and/or employed in specific fields such as health care, public safety and teaching.

2. Borrowers within specific income ranges, living in specific areas and working in specific public service fields.

3. Requires little money down and very little to closing costs and prepaid costs compared to conventional loans.

4. Eligibility is limited, and types of properties are restricted. Borrower must occupy property as primary residence.

HomeTogether Public Safety Program

1. A special home buying program offered exclusively to members of public safety. It gives access to education programs about the home buying and closing process as well as special mortgage programs.

2. Members of a public safety profession.

3. Requires little to no money down along with other fee waivers. Provides education and support concerning mortgages.

4. Eligibility is limited.

Stated Income and Stated Asset Program

1. Loan programs that require limited or reduced documentation of the borrower’s income and/or assets.

2. The self employed, or those with complicated financial records.

3. Traditional income and asset documentation–such as pay stubs and tax returns–is not required.

4. Good credit history is required. Types of properties are restricted.

FHA Fixed Rate Mortgage

1. Fixed rate mortgages generally suited for first-time borrowers and borrowers with less than perfect credit. FHA allows 100% of the cash needed to close to come from a gift. “FHA” means Federal Housing Authority.

2. Borrowers who may need more relaxed credit guidelines and who have limited funds to invest.

3. Gives hopeful homeowners the chance to secure a mortgage, even if their credit history is imperfect. Out-of-pocket closing costs are lower.

4. Loan amounts may be limited and vary according to state, county and city. FHA mortgage insurance is required.

FHA Adjustable Rate Mortgage (ARM)

1. The lower start rate on an adjustable rate mortgage may help a borrower qualify of a larger loan amount than with a fixed rate mortgage. “FHA” means Federal Housing Authority.

2. Borrowers who may need more relaxed credit guidelines and who have limited funds to invest.

3. Gives hopeful homeowners the chance to secure a mortgage, even if their credit history is imperfect. Closing costs are generally lower.

4. Loan amounts may be limited and varied according to state, county and city. FHA mortgage insurance is required.

FHA 203k Rehabilitation Loans

1. A specialty loan designed to rehabilitate properties in need of repair. “FHA” means Federal Housing Authority.

2. Borrowers who may need more relaxed credit guidelines and who have limited funds to invest.

3. Allows for homeowners to revitalize and improve a residence.

4. Loan amounts may be limited and varied according to state, county and city. Types of properties are restricted. FHA mortgage insurance is requir

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