Mortgage Atlanta’s Guide to FHA Loans

by Brian Berman on May 29, 2011

Federal Housing Administration (FHA) loans are a great way for people to buy or refinance a home.  The FHA is a division of the US Department of Housing and Urban Development (HUD) The FHA was created in 1934.  The mission of FHA is to promote home ownership.  FHA insures our loans so Mortgage Atlanta can offer you a better deal! 

There are 4 types of FHA loans: Purchase, Refinance, Cash Out, and Streamline. 

PURCHASE:
house
FHA Purchase loans allow a buyer to purchase a home with a minimum down payment of 3.5% of the purchase price.  Some borrowers may also qualify for down payment assistance programs as well.  For more information on down payment assistance please call your Mortgage Atlanta Loan officers today!  

Benefits to FHA Purchase Loan:

  • Lower down payment with good interest rates
  • FHA accepts lower credit scores
  • Down payment can come from a gift
  • FHA allows for co-signers
  • Seller is able to pay up to 6% of the purchase price in closing costs
  • FHA may allow for slightly higher debt to income ratios than other loans.

REFINANCE:

refiFHA Refinance loans allow people who currently are not in an FHA loan to refinance into a FHA loan.  This may be beneficial to someone who has a toxic sub-prime mortgage or an adjustable rate loan.  They are able to use FHA loans to refinance that mortgage into a safe mortgage product. 

Benefits to FHA Refinance Loan:

  • Refinance higher rate loans to lower payment
  • Can combine 1st and 2nd mortgage into one loan
  • May go up to 97.75% Loan to Appraised Value.
  • Roll closing costs into the loan
  • Lower credit score requirements than conventional loan

CASH OUT:
cash
FHA Cash Out refinances allow homeowners to tap into the equity of their home in order to pull cash out.  For example, if a home is valued at $200,000 and the home owner owes $100,000 in mortgage debt on the house, the owner may be able to $70,000 cash out of the house in cash.  This is a great way to fund a remodeling project or to pay off other high interest, or non-tax-deductable debts!

Benefits to FHA Cash Out Loan

  • Can access up 85% of the appraised value of the home’s equity
  • Higher loan to values than conventional loans.
  • Lower credit requirements than conventional loans.
  • Pay off high interest debt
  • Use cash for home improvement

STEAMLINE REFINANCE:

FHA Streamline Refinance is for borrowers who are currently in FHA loans that would like to change loan products or lower their interest rates.  If a borrower wants to convert from a 30 year fixed interest rate loan to a 15 year fixed rate loan or from an adjustable rate loan to a fixed rate loan a Streamline Refinance may be used.

Benefits to FHA Streamline:

  • May not need an appraisal
  • May not need to verify income or assets
  • Very simple transaction can save a tremendous amount of money

*** Sometimes the closing costs can be rolled into the loan and other times they cannot.

FHA LOAN FEATURES:

  • UFMIP
    •  All FHA loans have Up Front Mortgage Insurance Premium amount of 1% of the loan amount.
    • UFMIP can be financed and rolled into the base loan amount. For example, if you are borrowing $150,000 your base loan amount would be $150,000, your UFMIP would be $1.500.  You final loan amount would be $151,500.
  • MIP
    • MIP is FHA’s monthly mortgage insurance premium.
    • Depending on the type of loan and your down payment amount the amount of MIP will vary. For typical 30 year fixed home purchase with 3.5% down the MIP will be 1.15% of the loan amount divided by 12.
      • For example:  we will use the same loan amount of $150,000. 
        • The final loan amount with the upfront MIP is $151,500
        • Monthly MIP is 1.15% or .0115
        • Yearly MIP= 151,500 x 0.0115 = $1742.25
        • Monthly MIP = $1742.25 / 12 = $145.19  
  • In some cases if you pay off or refinance your loan you may be entitled to a portion of the UFMIP back.  You may also be able to request your MIP be removed if you have paid your loan down to 78% loan to value and it has been at least 5 years.
  • Most lenders have a minimum credit of 620-640 and a max debt to income ratio of 55%.

At Mortgage Atlanta we have a number of lenders that offer the best rates on FHA loans in GA.  We have also teamed up with the Department of Community Affairs to offer Down Payment Assistance for qualified borrowers.  So give us a call today to find out if FHA loans are the right option for you.

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Mortgage Atlanta, LLC. 601 Woodlawn Dr,, Suite 340. Marietta GA 30067. Phone: 678-564-1522 info@mortgage-atlanta.com

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