Am I Eligible for FHA Loan?

Buying a home is stressful, especially when you’re trying to buy a home when money is tight. When life hands you lemons, it can be hard to secure conventional home loans from banks, credit unions, or other lending institutions due to one factor or another. Thankfully, there is another option.

The Federal Housing Administration (FHA) offers loans for those with lower credit scores, first-time homebuyers, low- to moderate-income buyers, and many other situations that may apply to you.

An FHA loan is a mortgage loan backed and insured by the FHA and issued by an FHA- approved lender. These loans often require less of a down payment as well.

We discuss how FHA loans work, along with how they differ from conventional loans. There are also various types of FHA loans that we describe as well, along with general eligibility requirements. If you are interested in learning more or think that an FHA loan is right for you, be sure to contact an FHA-approved lender.

How does an FHA loan work?

An FHA loan works similarly to a conventional loan -- you borrow money to pay for a house with the agreement to pay it back with interest. However, there is one catch: borrowers have to purchase FHA mortgage insurance. This protects the lenders if you default on the loan and cannot pay it back.

And who pays for the mortgage insurance? You do. But it is not as daunting as it seems. Under all FHA loans, you are required to pay two different premiums: an upfront mortgage premium and an annual mortgage premium. 

An Upfront Mortgage Insurance Premium is around 1.75% of the amount for the loan, which you pay when you receive the loan. Often, this premium gets included in the financed loan amount, so you do not have to worry about having that money saved already.

The Annual Mortgage Insurance Premium varies in percentage of the loan amount, depending on the term, amount, and the loan-to-value (LTV) ratio of the loan you are looking to get. It is paid monthly.

These FHA mortgage insurance premiums may be canceled after 11 years if you finance around 90 percent or less of the property value and are current with all your payments. If your loan has a high loan-to-value (LTV) ratio, as in more than 90 percent, you will have to carry the insurance until the loan is fully paid off.

FHA Loans vs. Conventional Loans

Conventional loans require more from you as the buyer in terms of a down payment and line of credit. You may even have already experienced a denial for a conventional loan based on these factors. And if you are just getting started but are not sure if your credit score is good enough, here is a breakdown of the differences between FHA mortgage loans and conventional loans.

Requirements	FHA Loans	Conventional Loans
Credit Score (minimum)	500	620
Down Payment	If your credit score is between 500 to 579: 10% If your credit score is 580 or higher: as low as 3.5%	Between 3% and 20% to qualify
Down Payment Assistance Available	Yes	No

As illustrated in the table, there is often less required for you to put up front in terms of an FHA loan versus what you have to pay for a conventional loan. There are more requirements that go into an FHA loan to qualify than just credit score and down payment, and we will discuss them below.

Different types of FHA Loans

There are a variety of FHA loans that are available to you if you qualify. Each has unique pros and cons that are involved, and some have more requirements than others. There are two types of interest rates available for you to choose from: fixed or adjustable.

The fixed-rate mortgage means that the interest rate is a flat rate throughout the duration of the loan. It never changes.

There is also an adjustable-rate mortgage (ARM) that changes periodically over time, potentially even giving you a lower interest rate at times. Often, the FHA has a hybrid version between the two where a set time at the beginning of the loan is fixed-rate, with the remainder being adjustable.

There are several types of FHA loans you can explore. If you have any questions about the different types, be sure to talk to an FHA-approved lender to find what options are the best for you.

Home Equity Conversion Mortgage (HECM)

A Home Equity Conversion Mortgage (HECM) is one of the most popular types of a reverse mortgage. This type of FHA loan is applicable only to seniors age 62 and up. It works by allowing you to convert your home’s equity into cash while keeping the title to your home. You can get these funds either through a fixed monthly stipend or as a line of credit. You can also do a combination of both the fixed monthly payments and lines of credit.

Section 245(a) Loan

The Section 245(a) Loan is a type of FHA loan designed for borrowers who expect their income to increase. If you are this type of borrower, this program is a graduated type of payment as your income increases. The Graduated Payment Mortgage starts lower with monthly payments, and it gradually increases over time. The Growing Equity Mortgage has scheduled increases in payments that reduce the term of the loan.

FHA 203(k) Improvement Loan

This type of FHA loan factors in both the cost of the home and the renovations and repairs needed. The FHA 203(k) Improvement Loan rolls both the price of the home and the cost of improvement into one loan. This can help you if you do not have a lot of spare cash to help fix the house after the down payment.

FHA Energy Efficient Mortgage

The idea behind an FHA Energy-Efficient Mortgage loan is that it upgrades to increase your home’s energy efficiency to lower utility bills--which means you have more money at the end of the month to pay for mortgage payments. This loan is similar to the FHA 203(k) Improvement Loan, but instead for maintenance and repairs, it is to renovate your home to be more energy-efficient. This includes adding solar panels, wind energy, or even new insulation

Am I eligible for an FHA loan?

Contrary to popular belief, FHA loans are not restricted to first-time buyers or low-income households. You can be a repeat home buyer if you meet other requirements, in addition to the general guidelines. Moderate-income households can also qualify for FHA loans. However, there are some general requirements. It should be noted that if you are delinquent on your federal student loans or federal income taxes, you will not qualify, even if you meet all other requirements.

1. Verifiable income

To be considered for an FHA loan, you have to have a verifiable employment history for the previous two years and a verifiable income. It can be done through pay stubs, tax returns, and bank statements.

2. Payment of existing debt

Another requirement is that your income-to-debt ratios allow you to pay the monthly payments and keep consistent on all your other debts. Your “front-end debt ratio” is the monthly mortgage payment for the loan and cannot exceed 31% of your gross monthly income. Your “back-end debt ratio” is the mortgage and all other debt payments (car loans, student loans, etc.) and cannot exceed 43 percent of your gross monthly income.

3. Appraisal

The property also needs an appraisal conducted by an FHA-approved appraiser. This is to ensure the cost of the house, along with the property, meets certain minimum requirements.

4. Good credit history

Just because you may not have good credit now does not mean that you always had or will have bad credit. This is especially true for first-time homebuyers who may not have much credit to begin with but are good to make their payments. Essentially, you need to be able to demonstrate a history of being able to pay things back. This can be from rent payments to utility bills, or other loans. You also have to demonstrate that you are working towards establishing good credit.

5. Down payment

To qualify, you have to have money ready for a down payment. The amount you need depends on your credit score, and you can reference the table earlier for the down payment percentage for your credit range.

6. FICO score of at least 500

Your FICO credit score must be at least 500. But the higher your credit score, the lower percentage of a loan you need to be saved up for a down payment.

7. Primary residence and FHA Loan limits

The house must be your primary residence and cannot exceed more than the FHA loan limit for that particular unit type. These limits are determined by the region in which you live, with a special exception to the areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

8. Bankruptcy and mortgage foreclosures

At least two years must have passed if you experienced a bankruptcy event. Some special considerations can be made if you can demonstrate the bankruptcy was due to an uncontrollable circumstance. You must also be three years removed (at least) from mortgage foreclosures.

Final thoughts

When it comes to finding the right home, it can also mean finding the right loan. And when getting a conventional loan from a bank or another lending institution is not an option, it can be difficult. FHA loans are designed to help those who do not qualify or cannot get a conventional loan if they meet certain basic requirements. There are five types of FHA loans, and if you are interested in seeing if you are the right fit, reach out to an FHA-approved lender to get started.

Not sure where to start? Make Hero Home Programs™ your first call. Our specialists will help you along the home buying journey. We have helped thousands of people and look forward to serving you.

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How to Choose a Loan Officer?

Buying a home is a huge accomplishment—and a huge amount of stress. But it does not have to be if you have the right loan officer that will work with you and your financial needs to get you set up with a home loan.

A loan officer is a representative from a financial institution or mortgage company that meets with you, your real estate agent, and the other banking professionals to turn your home-buying dream into a reality.

And finding the right one can be a hassle. Thankfully, there are some ways to narrow down your search. Here we discuss what a loan officer is, how they work during your home-buying process, and why you should consider a dedicated loan officer when purchasing a home. We will also discuss the differences between a mortgage broker and a loan officer and how to look for the right one for you.

What is a loan officer?

A loan officer reviews, authorizes, and recommends your home loan for approval. They determine your creditworthiness and your ability to pay back a loan. Loan officers work with you throughout the home-buying process. They also work with your real estate agent, loan processor, and loan underwriter at the financial institution.

Your loan officer will discuss mortgage options with you and will keep you in the loop about your loan throughout the approval process. They play a large part in the home-buying process, so it is important to find the right one for you and your financial needs.

How does a loan officer work?

A loan officer is the face of your home buying loan. They meet with you (via phone, in-person, or sometimes online) and determine the right mortgage option for you and your ability to pay the loan back, along with seeing if you have a good line of credit. Once all of that is figured out, they recommend your loan for approval and send it to the loan underwriter.

Think of them as your inside agent to the lending institution. They are your intermediary between you, the underwriter, and the loan processor. The loan officer is the one that gives you the green light for your home shopping budget and is there when you are ready to make a purchase.

Why do you need a loan officer?

Loan officers are important people you want to have on your side as you journey through the home buying process. To use another analogy, they are the head coach to your home-buying baseball team. The lending institution is the owner, you are the general manager, and your realtor is your third-base line coach. Hence, you should (and need) to choose a loan officer before finding a real estate agent. Loan officers possess a lot of knowledge in the home-buying arena and have a lot of power to recommend your loan to be approved. It is vital to start working with a loan officer as soon as you start looking to buy a house.

Here are some key reasons why you need a loan officer:

• Guide you on your budget and mortgage options before starting to look for a home.
• Connect you to real estate agents in the area.
• You can get unbiased information about the differences between various parts of the area.
• Goldmines of information on home buying, the process, and the market
• Highly accessible and available
• Can grant you a preapproval to make you a more competitive buyer

Loan officer vs. mortgage broker: what’s the difference?

A loan officer, as discussed previously, is an employee of a lending institution. They are the head coach of the whole operation. That means mortgage brokers are the scouts. They bring together the lenders and the borrowers.

Mortgage brokers and loan officers are good to have from the get-go of buying a home. But you may not always need a mortgage broker—however, there are some situations they are handy to have on your side. They can connect you to lenders and banks and can make a deal from almost anything.

When is it handy to have a mortgage broker?

• Bad or problematic credit
• Unique personal or commercial properties
• Finding a loan officer in a different part of the country
• If an online bank doesn’t have an in-person office in your area

Mortgage brokers can help you find the right loan officer and lending institution for your needs, but they are not always required. If you bank at a local institution, you may not need the middleman to connect you with a loan officer. Keep in mind as well that mortgage brokers do take a percentage in their own fees.

Whether you choose a mortgage broker to help you find a loan officer or not, it is important to start finding those people as soon as the idea to buy a home enters your head. You may not need a mortgage broker, but you will need a loan officer, and it is important to start looking for the right one for you.

How to choose a loan officer

Choosing the right loan officer for you is important. There are a lot of factors that play into what loan officer is right for you. You should pay attention to those more genuine and ethical officers versus those that push you to make a decision quickly.

Fees

Loan officers sometimes receive a commission from the loans they help get approved, so it is important to consider their fees. And it is also vital to ask about the types of fees the lending institution itself has regarding your loan (late penalties, appraisal costs, etc.)

Familiarity with different types of loans

Taking into consideration the types of loans your loan officer is familiar with is a crucial factor. For example, a car loan officer knows many car dealerships and may not be as helpful as a loan officer with expertise in the housing industry.

Number of lenders dealt with

Some loan officers work with different lending companies. You want a loan officer that works with a variety of lenders so you can spread a wide net to find the right home mortgage loan for you.

How long in the mortgage business

Finding out how long your loan officer has been in the business is helpful information. You can ask for their license number and look it up on the national registry to see if they have any complaints filed against them. Also, looking up the company itself is useful, and you can see if there have been any reports to the Better Business Bureau.

Does the company hold or flip loans?

A lending company may hold the loan and collect the payments from you and answer any questions. Sometimes a lending company will flip a loan to a third party after it has originated. If that is the case, you must understand and be comfortable with payments and contacts to an unidentified third party.

Closing time

Asking how long the loan’s processing time is crucial. You want to know when everything will be finalized and approved, and the house is done and bought. Your loan officer can answer these questions and keep you in the loop as the process moves along.

The most important question, however, is one you have to ask yourself. Determining your comfort level with the loan officer is, and should be, the final deciding factor. If your gut is telling you that it is not a right fit, trust it and keep looking for the loan officer that makes you feel comfortable.

Start your home buying journey off on the right foot

There are a lot of factors that go into choosing the right loan officer for you and your needs. From finding the right officer to asking the right questions, you can be sure that the loan officer you choose to work with on your home loan is the right one for you. And once you find that perfect fit, you are one step closer to finding your perfect home. If you are ready to start the home buying journey, reach out to the home specialists at Hero Home Programs™. They offer reduced lending fees, access to grants and tax rebates, discounted vendors, and more.

The following post How to Choose a Loan Officer? is republished from https://www.herohomeprograms.com/

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Is Down Payment Assistance a Loan?

Home buying is stressful, but to add falling short of down payment can be something akin to a disaster. When you don’t have enough money to cover a down payment, that throws a wrench into the whole home buying operation. Thankfully, there is help in the form of down payment assistance (DPA).

What is Down Payment Assistance?

Down payment assistance are programs designed to help reduce the amount of money potential homeowners need to save for a down payment. This assistance often comes in the form of grants or low-income loans.

How much funding can you get from down payment assistance?

The amount of money awarded from a DPA is influenced by several factors, including the program and the state you’re from. However, a RealtyTrac study found that, on average, people saved over $17,000 throughout the life of their loan by using down payment assistance.

Types of Down Payment Assistance available

There are various programs available for down payment assistance. However, the type and amount of these programs vary by state, so it is a good idea to look into the programs specific to your area.

Grants

Grants are the best option. They never have to be repaid! Think of it as a giant gift of money. The amount and type of grant vary by state and some grants may have extra guidelines for eligibility.

Forgivable loans at zero percent interest

Another option for down payment assistance is a forgivable loan. These loans are second mortgages at zero percent interest that are forgiven after you live in a house for a set number of years. The forgiveness period varies and is determined by the lending institution. If you move before the forgiveness period occurs, you will have to pay back a portion or all of the loan.

Low-interest loans

Down payment assistance can come in the form of a second mortgage granted simultaneously with the first one. The key is to have a low interest rate (some lending institutions even offer zero percent!) as you will be paying this loan back. Essentially, you have two monthly mortgage payments, but the help from the second mortgage can cover the costs of a down payment.

Deferred payment loans at zero percent interest

Combining the forgivable loan along with the low-interest loan and you have what is called a deferred payment loan. These 0% interest loans don’t have to be paid as long as you live in your house. However, they are not entirely forgivable. You will have to pay back this type of down payment assistance when you move or sell your house or refinance your first mortgage.

Matched savings program

Another type of assistance is the matched savings program, also known as the individual development accounts. With this, homebuyers deposit an amount into a financial institution, and the institution matches the amount. You then can take that whole amount and apply it to a down payment.

Types of loans where you can use DPA

There are a variety of loans that you can have in conjunction with down payment assistance. These loans often come from government agencies, but some also are private.

The most popular are:

• HUD loan: The U.S. Department of Housing and Urban Development (HUD) makes it easier for those with shaky credit or with low- or moderate-income to own a house through their various programs.
• FHA loan: The Federal Housing Administration (FHA), a division of HUD, are also loan options. These loans are backed and insured by the FHA and help first-time homebuyers with buying a house.
• VA loan: The Veteran’s Administration (VA) offers loans to current members of the Armed Forces, veterans, and in some cases, spouses of deceased service members. You must meet service requirements to qualify.
• USDA loan: If you are looking to buy a home in a rural or suburban area, you may want to look into a loan from the U.S. Department of Agriculture (USDA). These loans have specific income and property requirements, so be sure to know if you qualify.

Eligibility

The exact eligibility requirements for down payment assistance vary by program and state and whether you live in a “target area.” However, there are some general guidelines:

• You must be a first-time homebuyer*
• Income level is low or moderate
• The home is your primary residence
• The home is in a “target area” determined by the census
• The down payment assistance is used with an approved mortgage loan
• You work with an approved mortgage lender for the program

*You can be a repeat home buyer if you haven’t bought a property for, at least, the past three years.

How to apply for down payment assistance?

To apply for DPA, you first start by researching what programs are available in your state, county, and city. HUD has a list of programs by state. Reach out to those programs if you have any questions that aren’t covered in your search. And then, find a mortgage lender that works with that program.

Is down payment assistance a good idea?

If you are a first-time homebuyer with a low- or moderate-income level and shaky credit, you may want to seriously consider your options using a down payment assistance program. It is important to be vigilant and conduct thorough research on each program to find the right one for you. Your mortgage lender can also be a great source of information on certain programs. All in all, if you meet the general requirements for DPA, then you should be looking into what your options are and get one financial step closer to owning a home.

You can also reach out to Hero Home Programs™ for more information about these programs.

The following blog post Is Down Payment Assistance a Loan? was originally published to https://herohomeprograms.com

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Can You Buy a House With Bitcoin?

The housing and financial industries are an ever-changing world and the rise in cryptocurrency has started a purchasing trend like no other. Professional athletes, like NFL tight end Sean Culkin, have converted entire salaries into bitcoin. This demonstrates the growing popularity of cryptocurrency and the new money trend of the 21st century.

With the rise of cryptocurrency, many are wondering what they can spend their crypto-cash on. From everyday small purchases to large investments, there is a lot you can do with cryptocurrency. But can you buy a house with Bitcoin?

What is Bitcoin?

Bitcoin (BTC) is a digital currency that has no centralized authority and is not backed by any bank or government. There is no thing as a physical ‘Bitcoin’, as it is more just a ledger of transactions that anyone can see, known as a blockchain. Bitcoin is one of the most popular cryptocurrencies there is. If you are interested, you can learn more about Bitcoin here.

There are other cryptocurrencies, with perhaps Ethereum (ETH) being the most popular alternative to Bitcoin. Another well-known cryptocurrency is Litecoin (LTC), which is seen as a later version of Bitcoin.

Can Bitcoin be taxed?

Bitcoin can be taxed, depending on the country. For example, in the United States, cryptocurrency is considered property and is subject to capital gains tax in the eyes of the Internal Revenue Service (IRS). This means that if you are a U.S. taxpayer, you have to report bitcoin and other cryptocurrency transactions on your tax return. Given that cryptocurrency is considered a form of property and not as money, it is taxed similarly to stocks.

How do you purchase a home with Bitcoin?

The first home ever purchased entirely with cryptocurrency was in 2017 in Texas. In a matter of minutes, the closing was done, and the transaction was completed with Bitcoin.

When purchasing a home using Bitcoin, the two parties must agree on the transaction, and both buyer and seller must have Bitcoin accounts. The transaction, once completed, is irreversible and cannot be undone. Some considerations are needed when looking to buy a house using cryptocurrency:

• The seller and their representatives need to understand the options and methods of cryptocurrency.
• The price is highly volatile, given that cryptocurrency is not backed by any tangible product.
• There can be a lot of risks involved for the seller, especially in a 1031 exchange.

Benefits of using cryptocurrencies for home buying:

Buying a home is a huge investment and not one to be taken lightly. There are a lot of benefits to using Bitcoin and other cryptocurrencies when purchasing a home. For one, it can be like a cakewalk moving through the process, along with saving you a lot of stress. Some benefits include:

• Less paperwork, which helps the environment
• Minimal settlement time
• Secure and proof of ownership
• Minimal transaction fee
• Some sellers are interested in investing in cryptocurrency and may offer a discount
• Fewer fees due to the absence of intermediaries

Challenges of using cryptocurrencies for home buying:

Just as there are benefits, there are also challenges that can come with buying a home using cryptocurrencies like Bitcoin. Despite having existed since 2009, there is still hesitancy amongst the general public to jump into the world of Bitcoin. Some challenges of using Bitcoin to pay mortgages include:

• The volatility of the price is extremely high
• Contract default risk is high due to cryptocurrency price volatility
• Some sellers may not accept cryptocurrency for the purchase of their home
• U.S. income tax liability to convert cryptocurrency to USD

There is a helpful table that compares Bitcoin transactions to standard USD transactions for purchasing a home here. The table also compares the different ways you can buy a home using Bitcoin and the pros and cons of each method.

Where can I buy a house with Bitcoin?

It can be difficult to find a place that lists what houses accept Bitcoin like a traditional real estate website. This can complicate a rather seamless process. Add on the stress of moving and packing, it can be a lot to try and find the right home.

Here are some websites to get you started on your search:

• Propy
• CryptoRoof
• BitHome
• Bitcoin Real Estate
• Realtor--Bitcoin

If you are just starting your home-buying journey, it is important to remember that things can change on a dime. The right home for you will pop up eventually, so it is important to stay optimistic and have hope.

Turn your Bitcoin into a tangible investment.

When it comes time to buying a home, you can consider cryptocurrency as a payment option. It is a great way to implement the money you earn through Bitcoin and other cryptocurrency services into larger life ambitions, goals, and dreams. The changing world of cryptocurrency has already gained a steady trend in availability and interest. And with services like Bitcoin, you can achieve things that were perhaps not possible with traditional money spending power.

If you are ready to start your home buying journey, reach out to specialists at Hero Home Programs. They work hard to save you thousands of dollars on the home buying process. From discounted vendors to local grants, they can help you attain your homeownership goal.

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