How Do FHA Loans Work?

How Do FHA Loans Work?

The Answer : Well let's start off with clearing up a common misconception. FHA doesn't do loans. FHA is an Insurance Program for loans that lenders do. That being said let's get down to the brass tacs: FHA is a "non-credit driven" program.What the guidelines are most concerned with is your ability to repay the loan. There are NO stated income FHA programs. While your credit score dose not matter your payment history does. If you are refinancing and you have had any lates on your mortgage in the past 12-months you will be limited to an 85% LTV. Clean mortgage history will get you 97.75% if it is a rate & term. 95% if you are looking to get cash out. If you are looking for a purchase loan you can buy with 3% down. This is the ONLY program currently offering a 97% LTV loan so it is very attractive for good credit borrowers as well. If you have any judgements, leins or collections on your credit report be prepared to pay them out of the proceeds of your loan. If you are refinancing and you are currently late on your mortgage you MUST bring it current before you can close. FHA is also concerned with the overall condition of the home. While the appraisal standards are set much higher it should no way be a subsitute for a home inspection if you are purchasing. Appraisal Horror Story: I just closed an FHA loan in NY where the bank refused to fund the loan until the owner painted his garage door.... Yes they are that pickey. Hope this helps!