Understanding FHA-Insured Loans

One of the few blessings to come out of the Great Depression was the FHA-insured loan. Although, contrary to what many think, it wasn't created to help low-income buyers get into homeownership. Just as during our recent Great Recession, during the Depression foreclosure rates skyrocketed, leaving lenders in the lurch. The FHA-insured loan was created to protect lenders from losses should the economy once again tank.

That said, the borrower does receive benefits from the loan. First, she benefits from the meticulous appraisal of the home, and second, from the low down payment requirements and attractive interest rates offered by lenders.

Eligibility Requirements

Although the Federal Housing Administration won't be loaning the money to you directly (you'll see a conventional lender for that), they'll take a look at your credit profile to determine whether they want to offer insurance on your loan.

Recent FHA changes call for a manual review of applicants with credit scores below 620 and debt-to-income ratios of 42 percent or higher. While these conditions don't automatically disqualify a borrower, it does decrease the number of applicants who qualify.

Statistics show that successful FHA applicants in August of 2013 had an average FICO score of 691, according to FoxBusiness.com. Unsuccessful applicants had an average FICO score of 667.

Remember, the lender may have stricter requirements, so it's always a good idea to take a look at your credit reports, fix any errors, and pay down some of your debt before applying for a mortgage.

The Down Payment

American homebuyers love the low down payment aspect of the FHA loan. Although lending criteria has tightened since the economic downturn, down payment requirements are still low – as low as 3.5 percent of the purchase price of the home.

An applicant with a FICO score lower than 579 may have to pay a 10 percent down payment, while those with higher scores – assuming they have adequate income and meet other loan requirements – typically qualify for the lower down payment.

Mortgage Insurance

Most homeowners know what PMI is – Private Mortgage Insurance. It's that policy they pay for but derive no benefit from. PMI protects the lender in case the borrower defaults.

FHA-insured loans also mandate mortgage insurance, but it's known as the Mortgage Insurance Premium (MIP) instead of PMI. As with PMI, FHA at one time allowed borrowers with a 78 percent loan balance to cancel their mortgage insurance premium. As of June of this year, however, that changed.

New FHA borrowers (since June 3, 2013) with low down payments (a starting loan balance of more than 90 percent of the value of the home) must pay for MIP as long as they have the loan. Borrowers with balances lower than 90 percent can choose to stop paying for MIP after 11 years.

To top it off, in April of this year FHA announced that they would be raising MIP premiums by 10 basis points, making the FHA-insured loan far less attractive than it once was.

Before settling on an FHA-backed loan, ask your mortgage broker to run scenarios comparing it with conventional loans as well as Fannie Mae's "My Community" loan program and Freddie Mac's "Home Possible" mortgage. You may find a better deal than FHA.

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3730 Chiniak Bay Drive Anchorage, AK 99515 - NO LONGER FOR SALE, BUT WE HAVE OTHERS! :-)

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Listing Information:
- Address: 3730 Chiniak Bay Drive
- City: Anchorage
- State: AK
- Zip: 99515
- Area: 20 - Dimond South
- Price:
- Listing #: 14-887
- Property Type: Single Family
- Listing Type: Resale/New
- Status: Active
Property Information:
- Style: Multi-Level
- Bedrooms: 4
- Total Baths: 3
- Year Built: 1977
- Sq. Feet: 2360
- Lot Size: 0.20
- View: Bay, Mountains, Partial
- Garage: Attached
- Taxes: 5127.40
- Heat: Baseboard
- Construction: Wood Frame
- Exterior: Cable TV, Covenant/Restriction, Deck/Patio, Fenced Yard, Fire Service Area, Garage Door Opener, Home Owner Assoc., In City Limits, Landscaping, Lot-Corner, Paved Driveway, Shed, View, Waterfront Access
- Waterfront: None
- Interior: Carpet, Central Vac, CO Detector(s), Dishwasher, Disposal, Family Room, Fireplace, Range/Oven, Refrigerator, Smoke Detector(s), Vaulted Ceiling, Washr&/Or Dryer Hkup, Workshop
- Utilities: Public; Public;
- HOA Dues: 80.00
- Lot Description: Level, Sloping
Listing School Information:
- Jr. / Mid: Mears
- Elementary: Bayshore
- Sr. / High: Dimond
Comments:

In Bayshore. Home has SS appliances, brkfst nook. Fam rm w/FP. Large bay wndws in living rm. Spacious entry w/large closet & side shelves. Dbl closets in mstr bedrm. Prvt mstr bath has in-floor heat. Plenty of closet and strge space! Dry stand-up crawlspace. Wrkshp in back of gar in a sep rm, and it's own utility rm. Fenced yard, shed, and deck. Clubhouse privileges.
- Listing Office:: Keller Williams Realty Alaska Group of Wasilla

The listing content relating to real estate for sale on this web site comes in part from the IDX Program of Alaska Multiple Listing Service, Inc. (AK MLS). Real estate listings held by brokerage firms other than Malcuit Duo - Keller Williams Realty Alaska Group are marked with either the listing brokerage's logo or the AK MLS logo and information about them includes the name of the listing brokerage. Malcuit Duo - Keller Williams Realty Alaska Group does not display the entire AK MLS IDX Listing Content Database on this web site. The listings of some real estate brokerages have been excluded. Last Updated Feb 2, 2014 10:25:pm. All information is deemed reliable but is not guaranteed and should be independently verified for accuracy. Copyright 2014 Alaska Multiple Listing Service, Inc. All rights reserved.

School information provided by GreatSchools.org

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