By: Greg Lundgren

Greg Lundgren is a Home Loan Expert with Quicken Loans and brings more than six years of mortgage experience to share with you on the Quizzle Blog. Greg specializes in FHA financing and enjoys helping people get into the right mortgage for their unique circumstances.

The Federal Housing Administration (FHA) has been helping people become homeowners since 1934. Since that time, it has helped finance over 34 million properties. FHA loans are pretty basic mortgages consisting of principal and interest payments with a monthly private mortgage insurance (PMI) that is much lower than traditional PMI payments.

One of the main benefits of FHA loans is that these mortgages can be more forgiving when it comes to qualifying and approving homebuyers to obtain financing. FHA loans are available for both home purchases and refinances. In the last 9 months or so, FHA loans have really regained momentum and are great options for many people who may not qualify for a mortgage under tightened guidelines in the mortgage marketplace.

In the early 2000s, several new types of mortgages were created that offered zero down, interest-only, stated income and no documentation. It seemed that almost anyone could get approved for a mortgage. Some people joked and said that if you had a pulse, you could get a mortgage. In early 2007, many investors began to consider these mortgages to be less than ideal investments, which resulted in the market that ultimately backs these mortgages to stop buying the loans from lenders.

Two very common scenarios affecting the market were:

• Adjustable rates going up, which caused payments to increase;
• Mortgage loan amounts higher than the actual property value.

The relaxed mortgage qualification guidelines that everyone had grown accustomed to had vanished, which created a problem for many homeowners and potential homeowners. This is where FHA loans step in to help many people.

FHA Purchases

FHA purchase loans offer as little as 3 percent down payments. The great thing about this 3 percent down payment is that the buyer doesn’t need to come up with it. It can come from a “gift” from a family member or close relative. It can also come from a down-payment assistance program through a third party non-profit organization as well. This allows many first time buyers to get into their first home without struggling to come up with a significant down payment.

In some areas of the country, potential home buyers need to come up with 10 percent down (or more) to obtain “conventional” home financing. Because of this, FHA loans are helping jump start the market by creating more qualified buyers to invest in the over-supply of homes available right now. In addition, the sellers can also pay for most (if not all) of the buyer’s closing costs. This allows buyers to purchase a home with $0 out of pocket.

FHA  Refinances

FHA refinance loans have helped many homeowners who may have no other options when it comes to refinancing. FHA loans allow borrowers to qualify even if they have some delinquencies on their credit report. Many times, these same clients would not have been approved through conventional financing, but are still approved on FHA loans. In some cases, these clients are trying to get out of adjustable rates mortgages or take cash out to pay off the debt that is causing them to be delinquent in the first place.

Whether you are looking to purchase or refinance, FHA loans are a great alternative to the conventional loans that have been offered in the past. Very recently, the FHA increased the loan limits from a maximum loan amount that was previously capped between $200,000 and $360,000 across the country (depending on what area the home is in) to a limit that is as high as $729,000 in some areas where home prices are higher, such as California and other high-cost areas.

Ultimately, more homeowners are turning to FHA loans to help them purchase a home or to refinance into a better loan. As mortgage guidelines continue to become more restrictive, FHA loans continue to maintain the same guidelines and in many cases, relax the guidelines to offer financing to borrowers who are in need of it.

To find out if a FHA loan may benefit your situation, contact Greg at 800-QUIZZLE (784-9953) Ext. 12655. Or make sure to always have Greg’s information at your fingertips right inside of Quizzle by creating an account through Greg’s personal referral link: http://www.quizzle.com/invite/greglundgren.