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FHA

FHA loans are loans from private lenders that are regulated and insured by the Federal Housing Administration (FHA), a government agency. The FHA doesn’t lend the money directly–private lenders do.

These loans generally end up costing more than conventional products, but the qualification rules are more lenient allowing more people to qualify for a home.

FHA Loans

  • Allow for down payments as low as 3.5 percent
  • Allow lower credit scores than most conventional loans
  • Have a maximum loan amount that varies by county

Mortgage Loan - Section 203(b)

Used to purchase or refinance a principal residence. This is the most common FHA program used.

Who may apply for this program?
  • Must be eligible for 96.5% financing and
  • Must be able to finance the upfront mortgage insurance into the mortgage
  • Must be able to cover the monthly payments for the annual mortgage insurance
  • Property is a one-to-four unit structures

Rehab Mortgage - Section 203(k)

This program fills a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment.

Section 203(k) offers a solution that helps both borrowers and lenders, insuring a single, long term, fixed or adjustable rate loan that covers both the acquisition and rehabilitation of a property. Section 203(k) insured loans save borrowers time and money.

What can you do with this program?

The extent of the rehabilitation covered by the Section 203(k) program may range from relatively minor (though exceeding $5000 in cost) to complete reconstruction. A home that has been demolished or will be as part of rehabilitatiod is eligible.

The types of improvements that borrowers may make using Section 203(k) financing include:

  • Structural alterations and reconstruction
  • Modernization and improvements to the home's function
  • Elimination of health and safety hazards
  • Changes that improve appearance and eliminate obsolescence
  • Reconditioning or replacing plumbing; installing a well and/or septic system
  • Adding or replacing roofing, gutters, and downspouts
  • Adding or replacing floors and/or floor treatments
  • Major landscape work and site improvements
  • Enhancing accessibility for a disabled perso
  • Making energy conservation improvements

Mortgage Insurance Rates

FHA mortgage insurance is comprised of two parts- the Up Front Mortgage Insurance Premium (UFMIP) and the Annual Mortgage Insurance Premium. The UFMIP is paid at closing and can either be financed into your mortgage or paid for out of pocket. The Annual MIP is part of your monthly payment.

Up Front Mortgage Insurance Premium

Rate
175 bps (1.75%)

Annual MIP - Greater than 15 Year Term

Base Loan LTV Annual MIP
≤ $625,500 ≤ 95% 80 bps (0.80%)
≤ $625,500 > 95% 85 bps (0.85%)
> $625,500 ≤ 95% 100 bps (1.00%)
> $625,500 > 95% 105 bps (1.05%)

Annual MIP - 15 Year Term or Less

Base Loan LTV Annual MIP
≤ $625,500 ≤ 90% 45 bps (0.45%)
≤ $625,500 > 90% 70 bps (0.70%)
> $625,500 ≤ 78% 45 bps (0.45%)
> $625,500 > 78% ≤ 90% 70 bps (0.70%)
> $625,500 > 90% 95 bps (0.95%)

Annual MIP - Duration

LTV Term
≤ 90% 11 Years
> 90% Loan Term
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