How Does a first time home buyer benefit from use of the 203k rehab loan?

In accordance with present-day methods of mortgage lending operations, most first time home buyers would probably have been pre-qualified and obtained a pre-approval by the time they reach the mortgage application stage. Whether that pre-approval is based specifically on 203k loan terms or just a generic pre-approval is anybody's guess, but chances are that most pre-approvals are generic and based on conventional guidelines or FHA guidelines; However, if the home buyer (now mortgage applicant) completed preliminary research, s/he would be equipped with good questions regarding mortgage financing options that the mortgage loan officer or mortgage specialist will answer (and be willing to elaborate on) thereby making clear the type of mortgage financing which that home buyer (or first time home buyer) will apply for.

When the mortgage specialist gets to the point of explaining the 203k rehab loan and benefits to be derived by financing the home purchase with it, the conversation might go something like this:

To be quite honest Sir/Ma'am, In order for you to finance your home purchase with the 203k rehab loan you would have to agree to a minimum of Five Thousand Dollars ($5,000) to be placed in escrow for the completion of needed repairs and/or improvements to the home. Those repairs will have to be itemized and estimated by a consultant approved by HUD (Housing and Urban Development), but the repairs would have to be completed by a general contractor - of your choice - licensed & insured by the state in which the home is located.

The $5,000 minimum amount can be used to complete any rehab/improvement outlined by the HUD consultant or any you would like completed as long as they are included in the HUD-approved repair list, a copy of which is made available to you. Since the home you are purchasing is typical for the area10 to 20 years old, 3 bedrooms, 2 baths, finished basement and 1 car garage, the repair cost may exceed the $5,000 minimum, but here is the difference in your monthly payments for the $5,000 minimum. Take a look at this! Your mortgage payments would increase by $26.84 per month on a 30 year amortized loan (which you prefer) at 5% interest rate (your probable closing rate) and every $1,000 increase in repair cost would add $5.37 to your mortgage payment.

Keep in mind that the work starts after your closing so that there is not an unneccessary delay in closing your mortgage loan. Financing your purchase with the 203k mortgage loan assures you that after the loan closes and you are the proud owner of a new home, you are now responsible for any and everything that can go wrong in that home, including the unexpected breakdown of the home's major working components; but since you chose to finance with the 203k rehab loan, chances are you will not have that problem because all the major working components in the home were inspected and will be included in the work write-up/contractor's estimate to be repaired or replaced thereby eliminating the problems before they occur.

Having the benefit of this information certainly supports the argument that the 203k loan should be considered a financing option of the non-conventional first time home buyer population in the early stages of home shopping and definitely at the time they are ready to get a home loan. Unless the home is within a year of having been newly constructed.

Here's the list of some repair items approved by HUD:

- Structural alterations and reconstruction
- Modernization and improvements to the home’s functions
- Elimination of health and safety hazards
- Changes that improve appearance and eliminate obsolescence
- Reconditioning or replacing plumbing; installing a well and/or septic system
- Adding or replacing roofing, gutters and downspouts
- Adding or replacing floors and/or floor treatments
- Major landscape work and site improvements
- Enhancing accessibility for a disabled person
- Making energy conservation improvements
 
 
Once your blocks are prepared and ready to be stacked, be mindful of upfront cash requirements.

When you enter negotiations to purchase a home the blocks of preparation mentioned above are generally what you would need to have put in place or something to plan for as part of the transition prior to actually making a long term commitment at the lender's closing table. Once the appraisal report is completed you are well into the transaction whereas the only way out is if the appraised value that is less than your contract price, or if your mortgage application is declined by the lender for another reason.

If the home is appraised at less of a value than the agreed upon price, you are not required to complete the purchase, unless it is so stated in the contract; and if your mortgage is declined you cannot complete the purchase. In both cases however, you are entitle to a full refund of your down payment. You will not receive a refund of any part of the appraisal fee, and if your attorney charged a retainer fee that is probably not refundable either.

Start Building

So you're ready to build your home purchase – your better home-purchase – in order to satisfy all your requirements in a home. Requirements that include major working components in the home working well after to closing takes place and your savings are depleted and there is no room for unforeseen breakdowns and emergency repairs. You need your home to be in top shape and you wanted to have a hand in making it so in order to eliminate the chance of unexpected outlay of cash which may have been set aside for other purposes.

Financing your home purchase with the FHA 203k rehabilitation loan keeps you, the buyer, involved with the purchase throughout the entire process. Unlike FHA 203b or conventional and PMI loan programs where you are not required to be at the property at the time of appraisal inspection or at any other time except the pre-closing walk-through, during the 203k process you must select the general contractor, as well as be present at the work inspection along with the HUD consultant and your contractor for the purpose of outlining what work you need done.

Once the transaction closes and work begins on your new home you are also continuously involved if the work is not too extensive, because you would have moved in; And if the repair work is such that it renders the home uninhabitable you must still maintain a presence in order to determine what kind of progress is being made as well as to collaborate with the contractor and the HUD consultant so that everyone is on the same page as to when you can take move into your home. When everything is said and done, you would have completed building your home-purchase in a manner that would serve you well for many years after closing.

 
 
This program is known as FHA (Federal Housing Administration) and has instituted an altogether different set of mortgage lending guidelines. Where conventional banks require 20% down payment, FHA requires 3.5% (up from 3% in 2009 and an even lesser amount in prior years); Enough monthly income (33% required to support PITI payments & 41% to support PITI+R&I debt payments), assets (3.5% DP + closing costs) as well as creditworthiness (640 credit score required by many lenders, but 580 minimum score set by FHA) must also be documented in a similar fashion to the kind of documentation required under conventional guidelines; And because of this difference in how much income & assets and what kind of credit background was required, it could be said that the FHA mortgage type can be described as creative real estate financing program with full verification of what's required to qualify for a FHA mortgage loan.

After the enactment of FHA and then Fannie Mae, mortgage lending had begun the rise as profitable and reliable investments in the mortgage financing industry (mostly savings & loan banking institutions) but, as mentioned above, many who wished to purchase a home could hardly afford one until these two agencies were created and later the VA (Veteran's Administration) Loan Guarantee program, intended specifically for World War Two veterans and their wives. There was more competition in the real estate financing market and home loans were now referred to in terms of the type of mortgage home buyers qualified for instead of the type of borrowers mortgage banks were willing to lend to (when many borrowers did not get mortgage loan approvals despite their qualifications) based solely on the bank's discretion and/or prejudices.

With more competition in the mortgage industry came more risk-taking, not recklessness in the early days, but risk-taking which meant that the huge increase in mortgage applications being taken by lenders approved to issue FHA-insured and VA guaranteed mortgage loans (VA loans had to be approved and stamped by the Veterans Administration) and loans closed was mortgage business that perhaps included a number of applications that may have otherwise gone to the savings & loans were it not for the restrictive lending policies and guidelines they adhered to. Despite this noticeable spike in mortgage business being done all around him, the conventional (traditional) mortgage lender was in no hurry to change his lending policies and guidelines, so changes to the conventional (traditional) mortgage loan did not occur as quickly as expected by some industry professionals.

FHA, VA, and PMI (Private Mortgage Insurance) were the other widely recognized mortgage loan programs on the market where the conventional mortgage loan was established as the traditional mortgage type... The mortgage prototype, if you will. Each of these programs deviated from the qualifying requirements and guidelines set forth by the conventional mortgage loan, except that PMI loans were based almost entirely on the conventional mortgage lending guidelines but differed in the LTV (Loan-to-Value) ratio which could be as high as 95%, thereby requiring a home buyer to make a down payment in as little an amount as 5% of the purchase price or appraise value (whichever is less) of the home s/he was purchasing. Continued...

 
 
Creative mortgage financing prior to the subprime mortgage crises was utilized by just about every real estate and
mortgage broker that was doing business during that time. The term Creative Financing to a mortgage lender may
have had a different meaning than to a mortgage broker or real estate broker because they were so many different
financing options available. It seemed then that each subprime lender had unique (niche) mortgage financing
methods and  programs (products?) that were specific to and available only through that lender so that you had to
deal with the particular lender in order to take advantage of a specific mortgage program.

There is nothing wrong with trade secrets, but it seemed that when mortgage lenders were continuously trying to
beat each other in the mortgage "market share" game by creating new and more innovative mortgage programs on
a regular basis, something was going to be overlooked or get lost in the race to creative mortgage financing
superiority. Throughout the modern mortgage financing era, conventional mortgage guidelines represented the
standard (conforming) mortgage program that all other mortgage programs were measured against and every
home buyer aspired to get approved for. If it meant scraping together the required 25% (or 20% as it later became)
down payment to get that approval, then that's what was done, but that limited the number of poential home buyers
who could qualify to buy homes.

The number of qualified home buyers increased as the FHA (Federal Housing Administration) mortgage program
played a more significant role in mortgage financing after being enacted by Congress in the mid 1930s. The
program, though limited in the early days, became a reliable source of mortgage financing for the working middle
class and low-to-moderate income people wanting to buy and live in their own homes, because the requirements to
qualify for one of these mortgages were more reasonable for the working class to deal with.

FHA required a down payment of a little over 2% of the contract purchase price and a mortgage borrower was permitted to
use at least 5% more of his/her gross monthly income to cover PITI+RD (Principal, Interest, Taxes, Insurance &
Revolving Debt) than was permitted for a conventional loan. Additionally, if the FHA borrower had one or two late
payments on past debt obligations the mortgage approval was not jeopardized as long as s/he could "reasonably"
explain why the problem(s) occurred and demonstrated a period of consistent debt payments after the occurrence(s).
The FHA mortgage program became more popular as the years passed because more people were purchasing homes and many of those homeowners cherished their homes, kept them in good shape and built equity that enriched their lives and created a better future for their families. There were no meltdowns, no mortgage crises that threatened to destroy everything they had worked for.

One of the FHA requirements that proved to be rather problematic for many real estate and mortgage professionals
during the '80s and early '90s was the appraisal. They were a few maddening issues with FHA appraisals that
caused real estate brokers to seek alternative mortgage programs to finance their sales. One such problem was
property repairs that the home seller was required to make as a condition of the loan closing. Sellers, their attorneys
and real estate brokers contended that they should not be required to complete repairs on a house they were
leaving, but the FHA refused to remove that requirement until recently (late 2008 and gradually into 2010).

The second appraisal problem was a consistently low appraised value as compared to conventional appraisals, but
despite these apparent flaws, a lot of FHA business was done. More sellers sold their homes and more buyers
realized their lifelong dream of owning a home. The most sought after mortgage financing program in the post
subprime era is again the FHA-insured mortgage financing program, and is still the most creative in its application,
having established one set of rules across the board; And the shareholders? All of US.

      LendingClub Investor

     
 
 
While many predicted the current collapse of the real estate market, others were taken by surprise when the market that had created so much opportunity for profit prior to the crash, began to crumble. Certainly, one of the leading events that eventually resulted in the collapse of the real estate market was the crash of the subprime loans market. As a result an unfathomable amount of mortgage companies were suddenly forced to close their doors. Even those companies that were not forced out of business found they had suddenly lost billions of dollars.

Just a few years earlier subprime mortgages were a seemingly great advantage to many property buyers; Buyers who were interested in taking advantage of the hot real estate market but who lacked qualification profiles required by conventional and FHA mortgages, and instead turned to non-traditional and exotic mortgages offered by subprime lenders in order to obtain loans. The underwriting guidelines for these loans were generally more lax than traditional mortgages ("No Income/No Asset verification") loans for example. This allowed even buyers with poor credit to obtain a loan. In exchange for making a loan to buyer with less than stellar credit, lenders were able to charge a higher rate of interest.

The money which funded these loans came from a variety of sources. Low interest rates made it possible in many instances for lenders to actually borrow money and then loan out those funds to home buyers and higher rates thereby realizing a higher yield (profit) for themselves. In other cases, the money was obtained from more complicated sources. As you may or may not be aware, it was not uncommon for governments to borrow money from central banks.  The housing market was stable back then; In fact, the housing market was experiencing a high that had not been seen in quite some time. Beyond the fact that many home buyers were taking on massive amounts of debt there also existed another problem. Due to the health of the real estate market at the time, there were expectations - by some experts - regarding future growth that, in hindsight, now is proven to have been unrealistic.

The last two full years of the real estate boom occurred in 2005 and 2006. During that time period lenders did not hesitate in the least to lend money to borrowers regardless of their credit profile (unless the applicant was so bad in all areas of qualification it would have been impossible to justify a loan to him/her). These loans represented tremendous money-making opportunities for lenders. Problems really began to occur; however, when interest rates began to rise from their previous lows. Historically, rising interest rates always had a negative effect on the real estate market. When rates are low they help to produce demand; however, when they are high they ultimately cause prices to fall. Until mid-2006 home builders could not build new homes fast enough to meet the growing demand. During mid-year; however, the demand began to slow. It was also about this time that the rate of defaults on loans began to increase.

Before long many mortgage lenders began to find it difficult to obtain money from their previous sources of funding. As a result, would-be buyers discovered that loans were no longer as easy to obtain due to the fact that money was no longer as widely available. Additionally, investors suddenly became wary of taking on risk and underwriting guidelines grew stricter. Homeowners who had taken out loans with adjustable rates began to find it difficult to meet their mortgage payments as interest rates continued to rise and those mortgages adjusted to make payments higher. More stringent underwriting guidelines meant they were unable to refinance to fixed rate mortgages in many cases. As a result, defaults continued to rise; fueling the massive rash of foreclosures.

    LendingClub Investor

   
 
 
When discussing the real estate and mortgage markets these days, it is almost a necessity to also discuss current unemployment numbers because one of the basic qualifications a potential home buyer must meet in order to obtain a mortgage is "a consecutive twenty-four months of employment", preferably with the same employer depending on his/her overall work history. According to FHA requirements and guidelines a mortgage applicant must be able to document the most recent two years of employment regardless of whether s/he has perfect credit and a large down payment (twenty percent or more).
Short-term housing - Home away from home
It seems then that when an individual is laid off (fired)
from the job that s/he held for a considerable period of time his/her ability to purchase a home becomes almost non-existent and therefore has a direct impact on the reporting of housing units sold in that region of the country. Housing sales for the month of July, 2010 showed a reduction of twenty seven percent (27%). This decline is most likely attributed to the continued unemployment situation that has been a constant problem throughout this recession.
Short-term apartments in various US cities
So we know that the economy is not good as measured by unemployment
which directly affects real estate and mortgages in a negative manner; What hasn't been determined yet is how to solve (or improve) the situation. What are the answers? Get a job? A new job in which your income is similar in amount and frequency would be acceptable to the FHA and you may still qualify for the mortgage (but only after you have received your first 30 days in salary) because your work history on the previous job can be added to the first month on the new job and used to satisfy the two year requirement.
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What if companies are not hiring?
This has become an often-repeated reason for the continued high unemployment (9.6% as of yesterday's - Friday September 3, 2010 - report) and will continue as the main reason until companies begin to hire again; But, is there perhaps another option? Is there freelance work available that does not require a company to provide all the benefits that an employer must (e.g. health care, workman's comp, paid vacations, etc.).
FHA-insured mortgage programs discussed
If your new freelance (independent contractor) work
is comparable to the work you had done for the employer that laid you off, and you can show proof of earnings (30 days worth of pay statements or other documentation), and prospects for continued work are good or excellent, your chances of getting a FHA-insured mortgage approval may still be very good. Of course, through this process of being laid off and reapplying for jobs as well as having to settle for freelance work could have a rather negative impact on your desire to pursue a home purchase, and this is certainly understandable in these times of uncertainty.
Mortgage Stories: FHA mortgage program info
Borrower-friendly Loans: BK-HECM programs
Home Buying & Home Selling tips from Trulia


   

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The process involved with first time home purchases can get quite overwhelming, giving some buyers the impression that the financial decisions are rapidly spinning out of control.  When it comes to real estate and real estate loans, most people don’t have a lot of experience or knowledge about the process but in all actuality, buying a home is actually a simple process.  All you need to do is understand the basics and that will help to alleviate a lot of the worry about your first-time home purchase.

Probably the most worrisome part for those involved in a first-time home purchase transaction is the financing of the property because there are so many different factors involved. One such factor is; How are we going to pay for this home? Or can we pay for this home? What's important for the buyers to remember is the fact that if they managed their previous housing expenses in a satisfactory manner (this is to be expected since they are now looking to purchase), then that is the point from which they can begin to eliminate things to worry about. In other words, control what is controllable first, and then go from there. We'll assume then that earnings are satisfactory.

Another question which sometimes create some uncertainty is; Do I (we) have enough of a down payment to make this purchase? What if we don't have enough money? This question is important to consider by the buyers in a first time home purchase, because the general feeling about home purchases is "you never have enough of a down payment". Most of us would rather make the purchase with our own cash resources and not owe the bank a dime, but unfortunately, that is unrealistic so the next best thing is to have sufficient enough of a down payment to satisfy the lender's requirements.

Since many lenders issue loans insured by the Federal Housing Administration (FHA), and the FHA requires a minimum down payment of 3.5% of the purchase price or the appraised value (whichever is less), this should be a worry that can also be eliminated simply because it is the FHA required down payment is the lowest on the market (except for VA guaranteed loans which are restricted to veterans of the Armed Services and their spouses). When  prospective purchasers who have managed their household expenses in a satisfactory enough manner to believe that they could begin to look for a home of their own, it is reasonable to assume that they have considered the down payment requirement and as such may have saved or have access to the FHA minimum required down payment. Assuming that there is enough of a down payment, this worry can be eliminated from the list.

Let us make a few additional assumptions here; Based upon the first qualification (satisfactory household expense management) which encompasses payment of all expenses associated with managing a household, e.g. rent, utilities, phone, cable, insurance (auto, personal and life), kids (if any), credit cards, auto loans, etc.; It is not a far reach to assume also that the credit report will reflect positively enough to be approved by a lender, so the buyers in our first time home purchase transaction, having demonstrated thus far that they have met certain responsibilities in a satisfactory manner, the credit report may be another item of worry that can be eliminated from the list.

Although there is no way of knowing what's going to show up on the lender's credit report, you can feel pretty confident that it won't be an issue, especially if our buyers had previously requested their free copies fro the credit bureaus. This is something we would expect them to do based on prior satisfactory actions. The thre most important requirements of buyers in a home purchase transaction, whether it is a first time home purchase or not are sufficient enough earnings to support the repayment of the mortgage loan, enough of a down payment to satisfy the lender's Loan-to-Value (LTV) ratio requirements, and a good enough credit profile to support the lender's trustworthiness (that  a buyer will voluntarily repay the loan in accordance with the mortgage terms) requirements.

These are areas that can be controlled by the buyers. When the transactions are first time home purchases,  buyers' qualifications are documented a little more thoroughly simply because there is no track record (experience) of they having dealt with the expenses or the maintenance, repairs, or utilities in a complete house as opposed to just a rental. Having said that, the buyers in a first time home purchase transaction must always be aware of what the lender will expect of them and the lenders must certainly know what the buyers expect of them, because the lender will be responsible to take care of everything about the transaction that the buyer cannot control, e.g. property evaluation, loan terms, market rates, title reports and surveys (in many states outside of NY), process, underwrite, approve and close the loan. Being aware of the responsibilities of the respective parties to each other helps to alleviate most of the worry in first time home purchases transactions.

     

 
 
FHA Mortgage Loan

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In past decades, it was believed that a FHA mortgage loan was a FHA mortgage loan no matter what type was chosen, because they weren't many options available. But that is not true anymore because of the many FHA mortgage loan products available today. So before choosing a FHA mortgage loan, it is very important to decide which one is right for you.


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Finding the right FHA mortgage loan means balancing your mortgage options with your housing requirements and financial picture, now and in the future. Also the right FHA mortgage is not just having the lowest interest rate but much more than that;. And this “much more” will be determined by your personal financial picture. Whether or not your financial picture reflects an ability to pay FHA mortgage payments on a monthly basis can be evaluated by answering the following questions:

  • what does my current finances look like? Income, savings, reserves, debt, etc.
  • Is my outstanding debt payments a large percentage of my income?
  • Do I expect my finances to change in the coming months and years?
  • Do I plan to or will I be able to payoff the mortgage loan before I retire?
  • How long do I intend to keep my home anyway?
  • Will I be comfortable with an adjustable (rate?) mortgage payment?
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The answers to these questions will provide basic information which may help you to better determine your financial picture and home buying ability. Your next step is to decide on two key options:

  • Mortgage length, and
  • Type of interest rate (fixed interest rate or adjustable interest rate).
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The length of a FHA mortgage loan is generally a minimum 15 years; but can be 20, 25, or a maximum 30 years (some lenders have offered 40 and 45 year terms, but they weren't, and still aren't very popular). While selecting a fixed or adjustable interest rate you should be aware of certain facts. 1) The adjustable interest rate on a FHA mortgage is more risky because the rate will change. 2) The fixed-rate loan offers more stability because it is locked-in after closing.

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Although you will be able to pay off a shorter-term loan more quickly, you must be sure that you can comfortably afford to pay the higher monthly payments before opting for the 15 year term. Long-term fixed-rate loans are popular because they offer certainty, and many people find that the payments are easier to fit into their budgets. Although, in the long run 30 year loans will cost you more in interest, you will have more available capital during the loan term when you need it, and you will be less likely to default on the loan should an emergency arise.


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In view of the above mentioned considerations, it is clear that the key to selecting the right FHA mortgage loan is how the new debt fits into your overall financial picture. Having payments fit comfortably within your budget is most important when taking on a big-ticket item expense such as a FHA mortgage loan.


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Hello,

If you arrived at this page from the original "Pro-FHA" blog; Welcome! Please accept our appreciation for your visit. Appreciate is extended to every visitor to this website and to each of our readers for your support of the work we are doing to provide relevant and useful FHA mortgage information to those need it. Please leave a comment by clicking the "comments" link. Thanks.

TP-

Understanding the Process

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A FHA-insured loan is what many people use to buy their homes. FHA-insured loans have been instrumental in bringing joy to families by making that unaffordable house into affordable home. Some business owners who occupy the mixed-use properties in which their businesses are housed also make use of FHA-insured loans for buying those properties. However, a FHA-insured loan is not free money and anyone who buys real estate or plans to buy real estate using a FHA-insured loan must understand the concept of FHA-insured loans very clearly. They must understand that FHA  is not the lender, it only insures the loans

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FHA-insured loans (also known as mortgages) is money that you borrow from a financial institution, i.e. a mortgage lender, for the purpose of buying a property. The FHA-insured loan generally covers a part of your purchase price and the remaining portion has to be paid out-of-pocket for down payment and closing costs. The amount that you have to pay as down payment is dependent on a number of factors, including the FHA required minimum down payment which is currently 3.5%. Whatever you borrow from the mortgage lender as a FHA-insured loan needs to be paid back to the mortgage lender over a period of time (and of course, you will also need to pay appropriate interest on that FHA-insured loan).

Learn more about the FHA-Insured 203k Rehab Loan

The tenure of your FHA-insured loan and the prevailing market rate will determine the amount of interest you pay on your FHA-insured loan. Generally, you are required to pay back the FHA-insured loan in the form of monthly installments which are composed of both interest and principal portions of the loan. Also, there are various types of these loans, e.g. fixed interest rate loans and adjustable interest rate loans. So depending on what type of FHA-insured loan you have opted for, your monthly payments might either remain constant (fixed rate) for the full tenure of the loan or may be adjusted periodically (adjustable rate) on the basis of a financial index.

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Besides that, some other costs associated with FHA-insured loan are closing costs, inspection costs and attorneys fees, among other costs and fees. Also, in case the property needs some repairs, there will be costs associated with that too (in which case you can opt for the FHA-insured 203k loan which will allow for the work to be completed per separate estimates and agreements). There is stamp tax and other taxes that you will need to pay, but  understanding the concept of a FHA-insured loan and the related costs will make the home-buying process a lot smoother. And the process is really not that tough to understand if you invest a little time reading up on it.

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FHA Home Loans

FHA home loans make the process of buying a new home more affordable than ever.  As you may already know, these types of loans give you many opportunities that wouldn’t be possible without them.  When you buy a home, you should understand as much as you can about the process, as well as the questions you will be answering.  This way, you’ll be familiar with how things work and you’ll find the entire process to go much smoother.

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When you look towards a home purchase loan - FHA or otherwise - you’ll need to fully understand the interest rates.  They are never the same and will vary among the different financial institutions.  In many cases, interest rates on home loans can change on a frequently, with little to no notice.  When you buy a home, it is very important that you keep up with economic news.  Any change in interest rates for a home loan will have a direct impact on the amount you pay back.

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When getting a FHA home loan, you’ll also need to understand the terms and the length of the loan.  Almost all financial institutions and lenders have a variety of different plans and periods for you to choose from.  If you choose a longer period, in most cases your monthly payment will be reduced.  You can find this out yourself by using a mortgage calculator, which will help you determine how much your mortgage payment will be before you decide on the terms offered.

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As you probably already know, your ability to repay the loan is very important.  Some lenders require that you to pay a penalty for early payoff, while others may provide you with the option to pay it off any time you wish without a penalty.  FHA Home loans  requires no penalty for early payoff of your home loan, this way you won't end up being penalized if you need to relocate. In addition, If you are able to pay your loan off several years early you’ll save a lot of money in the long run.

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For the potential home buyer, FHA home loans offer several different opportunities.  Before you rush out and get a home loan, you should always know what you are agreeing to.  You should also check out the company you are thinking of getting the loan from as well, so that you can better prepare yourself when you go through their process of getting your FHA home loan.

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