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FHA loans
 An
FHA loan is insured by the Federal Housing
Administration, a federal agency within the U.S.
Department of Housing and Urban Development (HUD). The
FHA does not loan money to borrowers, rather, it
provides lenders protection through mortgage insurance
(MIP) in case the borrower defaults on his or her loan
obligations. Available to all buyers, FHA loan programs
are designed to help creditworthy low-income and
moderate-income families who do not meet requirements
for conventional loans.
FHA loan programs are particularly beneficial to those
buyers with less available cash. The rates on FHA loans
are generally market rates, while down payment
requirements are lower than for conventional loans.
Some of the other benefits of FHA financing:
- Only a 3 percent down
payment is required.
- Closing costs can be
financed.
- Lower monthly mortgage
insurance premiums and, under certain conditions,
automatic cancellation of the premium.
- More flexible underwriting
criteria than conventional loans.
- FHA limits the amount
lenders can charge for some closing cost fees (e.g.
the origination fee can be no more than 1% of
mortgage).
- Loans are assumable to
qualified buyers.
VA Loans
| VA
guaranteed loans are made by lenders and guaranteed by
the U.S. Department of Veteran Affairs (VA) to eligible
veterans for the purchase of a home. The guaranty means
the lender is protected against loss if you fail to
repay the loan. In most cases, no down payment is
required on a VA guaranteed loan and the borrower
usually receives a lower interest rate than is
ordinarily available with other loans. |
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Other benefits of a VA loan include:
- Negotiable interest rates.
- Closing costs are comparable
and sometimes lower - than other financing types.
- No private mortgage
insurance requirement.
- Right to prepay loan without
penalties
- The Mortgage can be taken
over (or assumed) by the buyer when a home is sold.
- Counseling and assistance
available to veteran borrowers having financial
difficulty or facing default on their loan.
Although mortgage insurance is
not required, the VA charges a funding fee to issue a
guarantee to a lender against borrower default on a
mortgage. The fee may be paid in cash by the buyer or
seller, or it may be financed in the loan amount.
A VA loan can be used to buy a home, build a home and
even improve a home with energy-saving features such as
solar or heating/cooling systems, water heaters,
insulation, weather-stripping/caulking, storm
windows/doors or other energy efficient improvements
approved by the lender and VA.
Veterans can apply for a VA loan with any mortgage
lender that participates in the VA home loan program. A
Certificate of Eligibility from the VA must be presented
to the lender to qualify for the loan. |
