Although an FHA loan is backed/insured by the Federal Housing Administration (FHA), the loan is not actually made by FHA. Approved FHA Mortgage Lenders are who you would work with to fill out your loan paperwork and get approved. At that time, FHA would guarantee or “insure” the loan. This allows the mortgage lenders a guarantee on that loan.
FHA loans were started in the 1930’s during the Great Depression, when home loan defaults rose sharply,. The intent of these loans was to provide lenders with a type of insurance against home loans. FHA loans are known today as a way of helping buyers get into a home with a lower down payment as that of a conventional loan, which is usually 20%. Most FHA loans require only a 3 1/2 % down payment on a home. Some buyers may qualify for other down payment assistance programs, such as CHFA, which would require even less of a down payment.
Below are some of the requirements for an FHA loan
The home you are purchasing is going to be your primary residence
Steady employment history with the same employer over the last 2 years with the same or increasing income during that period of time
Your credit report should be in good standing with less than two, thirty day late payments.
If you have any bankruptcies, they must be older than two years ago, and your credit must be good for the past two years.
Any foreclosure must be older than three years, and your credit must be in good standing for the last three years.
Mortgage payment must be roughly 30% or less of your monthly gross income
You do not currently own a home
If you can answer yes to the questions above, you should have no problem qualifying for an FHA home.
I would love to help you find your first home. With interest rates still at a record low, and a strong buyers market, you can find a great home and in about 45 days, be moving in!
Call me today to get your home search started!
A HUD home is a home that was purchased with a FHA loan and went into foreclosure. The loans are handled by the Department of Urban Housing and Development (HUD) which are responsible for getting the homes resold. The homes are inspected and appraised then listed for sale through Real Estate Agents. The homes are listed on a “bid” system. There is a process for bidding on the homes. The homes are offered first to “owner occupy” buyers These are homeowners that are wanting to purchase the home as their residence to live in. Many of these buyers are able to obtain FHA loans which only require a 3.5% down payment. If a home is not “sold” during the time period for owner occupies, then the home is offered to everyone. This is usually where investors look for properties that will make a great rental, flip or other investment type property.
If a bid is not accepted, just like any home that is on the market for any length of time, the price of the HUD home is reduced until a bid is accepted to purchase the property.
As with any home listed, you can ask to look at any of the HUD homes that are for sale. You will want to treat this home like any other and have a home inspection done to determine if there are any repairs or issues that need corrected. Unlike the stigma that HUD homes are “fixer uppers”, many have been well cared for and are move in ready.
Anyone can search the HUD home listings, but in order to place a bid, you must have a Real Estate Agent that is licensed with HUD represent you and place your bid to purchase a property. Your agent can check at the end of each bidding period to see if your offer was accepted or if the bidding period is still open.
With HUD homes, the earnest money deposit is between $500 and $2000, and is specified for each property. The earnest money is a “deposit” for your property that you you intend to purchase and acts as a hold. At closing, your earnest money is credited towards the purchase of your home. Some HUD properties are on a special program where you only have to pay $100 for the earnest money. Your agent can let you know if the home you are interested in qualifies.
Once your bid is accepted, you will work with your REALTOR and Mortgage Lender to get everything secured for your financing and be ready to close on your property. Unlike the traditional home purchase, most HUD homes do not require an appraisal. The lender will usually use the appraisal that HUD had done when they took over the property.
Once your financing is finalized and the inspection is complete, you are ready to close on your new home and take possession. The period between your offer being accepted and the actual closing can be around 45 days (plus or minus).
You are now the owner of a HUD home and the process was probably nothing like what you thought it would be. With the right agent representing you, it should be a pretty easy process!
If you would like to look at HUD homes in the Pueblo County area, I hope you will give me a call and let me put my HUD experience to work for you!