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 3.5 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.
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.
The question below is something that I have been asked a few times;
How do you use VA loan guarantee when you have a balance due from a previous VA loan?
We bought a house in MD in 1997 that was VA guaranteed. Three years later my husband got orders to move to CA so we sold it. We ended up selling it for less than we bought it. We're trying to buy a house in CA now. We applied for a VA eligibility certificate. We don't exactly understand our options. The letter stats; "We regret to advise you that you do not meet the requirements of the law for restoration bcause VA suffered a loss of $15, 286 in connection with your prior loan and the loss has not been fully repaid." The following paragraph mentions something about a remaining Loan Guaranty Entitlement to possibly obtain another GI Loan. There's a seperate page titled Certificate of Eligibility with an entitlement code 10, if that means anything. What are our options? We could pay up to $6000 of the $15000 we owe the VA. Is it possible to get the rest added onto a new loan or get the sellers to pay it if they want to take $8000 off their listing price and apply it here instead?
ANSWER:
It means you can still qualify for a VA LOAN without paying off the existing balance. Here is how the calculation works;
$417,000 X 25% = $104,250 which is your full entitlement
Now you take your full entitlement and subtract the balance owed
$104,250 - $15,286 = $88,964.00
Multiply the $88,964 X 4 = $355,856 and this is the maximum amount you qualify for WITHOUT paying off the balance owed to VA.
If you need additional information you can contact me at http://www.deannepowell.com or deanne.powell@wjbradley.com
W.J. Bradley Mortgage Capital, LLC.
W.J. Bradley Mortgage Capital, LLC. of Nevada is licensed as a broker and a banker in the State of Nevada.
"Money invested through a mortgage broker is not guaranteed to earn any interest or return and is not insured."
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