What is FHA?

What is FHA?
The National Housing Act of 1934 established the Federal Housing Administration (FHA). In 1965, the FHA becomes part of the US Department of Housing and Urban Development(HUD). Since 1934, the FHA and HUD have insured over 34 million mortgages.

The FHA has also been active in financing the development of multi-family housing. The FHA loan process requires borrowers to have no foreclosures in the past three years and no bankruptcies in the past two years. FHA current down payment requirement is 3.5%. For many years FHA rules require every borrower to put down a minimum of 3.5 present to qualify for a loan. However, this year the organization raised that minimum that amount to 10% for borrowers who had a FICO score (credit score) lower then 580 in order to protect its financial reserves.

What is the limit for the amount of an FHA loan?
It depends on the market of the property being purchased. FHA limits are set on the basis of local area median home price. In low-cost areas, the limit is $271,050, but it could go as high as $729,750 in high cost areas. You can find the FHA's loan limits for your market at http://www.fha.com/lending_limits_state.cfm?state=MARYLAND

If you decide to seek an FHA loan there are certain guidelines that Agency loan counselors will want you to meet. Two of the most important are the relative amounts of your mortgage and your household income, and the monthly mortgage payment in relation to your total monthly debt obligations.

Generally, the FHA will want your mortgage payment (generally meaning principal, interest, property taxes and property insurance — PITI) to be no more than 31% of your gross monthly income. Further, your total monthly debt obligation including the mortgage; credit cards; auto loans; student loans; etc. should come to no more than 43% of your monthly income. These ratios are more generous than many that you will find for non-FHA loans being offered today. Even higher ratios are available if you are purchasing an energy-efficient home. The so-called “stretch” ratio is 33/45 — 33 percent for PITI and 45 percent for all ongoing monthly payments. The FHA requires an appraisal of the property. Beyond physical inspection, the applicant must disclose all “sales concessions” to the appraiser. Those may include loan discount points, origination fees, interest rate buy downs, closing cost assistance, payment of condominium fees, builder incentives, down payment assistance or monetary gifts. The FHA has a list of closing costs which it considers reasonable and customary. Those include:

•Lender’s origination fee (one percent maximum)
•Attorney’s fees
•Appraisal fee
•Inspection fee
•Title insurance and title examination fee
•Property survey
•Credit reports (actual cost)
•Transfer taxes and recording fees

If you are looking to buy condo from condo building - half of the units must be occupied by their owners. The condo must also be thre borrower's primary residence. Additionally, the building must meet FHA and HUD standards. To find out if the development has been approved, go to: https://entp.hud.gov/idapp/html/condlook.cfm

If you still have questions about FHA,
please call Tatyana: 443-527-4375