HomeLander Mortgage

Tag: fha home loan

  • FHA Home Loans – New Construction Guidelines for 2022

    FHA Home Loans – New Construction Guidelines for 2022

    There are various loan types and programs available for homebuyers. One such is the FHA Loan Program. The Federal Housing Administration insures FHA-Insured Loans. If a borrower defaults on a loan and the house isn’t worth enough for the debt to be repaid through foreclosure, the FHA will compensate the lender for a percentage of the loss. 

    The FHA Construction loan, however, allows borrowers to take out a single loan allowing them to buy land, build their home from scratch, as well as finance their permanent mortgage. This is known as a three-in-one mortgage called the ‘FHA One Time Close Construction loan’. These loans are also government-backed by the Federal Housing Administration; however, the requirements for this program can be stricter than for traditional FHA loans.

    As of 2022, these are the updated FHA one-time-close construction loan requirements which apply to the borrower, property, and contractor.

    Borrowers must be able to provide a down payment of at least 3.5%. 

    They must have a credit score of 620 or higher. 

    Debt-to-income ratio (DTI) must be acceptable for FHA loan guidelines and can be as high as 56%.   

    Additionally, all FHA borrowers are required to pay mortgage insurance premiums (MIP) – this protects the lender in case of default.

    As for the chosen property, the loan amount must not exceed FHA loan limits and cannot exceed the property county’s maximum loan limit. 

    The property must also be eligible.  Eligible homes include single-family homes, modular, and manufactured homes. Only single unit homes are permissible with the FHA construction loan program, and the home’s intended use must be a primary residence.  

    Lastly, the FHA must approve the chosen contractors. Contractors are all required to have the necessary licensure required by their state, general liability insurance, and at least two years of experience in constructing homes.

    Meanwhile, keep in mind that loan interest rates for an FHA construction-to-permanent loan can be higher than for other types of FHA loans. HomeLander Mortgage offers the one-time-close construction loan.

    Builders may request draws as the work is done.  As work is completed, the contractor is paid on a draw schedule set before closing.

    Once the home is completed, the lender will convert the construction loan to the permanent mortgage at the interest rate that was locked at the time the loan closed, before construction started.

    For more information on how the process works, please visit HomeLanderMortgage.com. HomeLander Mortgage specializes in these types of loans and is able to navigate the process. Schedule a call to begin the process at www.homelandermortgage.com

  • What You Need To Know Before Renovating

    What You Need To Know Before Renovating

    Home renovation loans, also known as Home Improvement loans, are a way for homeowners to finance their fixer-uppers or older homes that need updating. These loans cover the entire renovation project – and yet many potential borrowers don’t know that they are an option – let alone how they work.

    Whether it’s a kitchen or bathroom renovation project, adding on a home office, or installing a new roof, major home improvements require a sound budget. Home renovation loans provide funding for renovating, remodeling, and repairing a home. It can be thought of as a mortgage that includes extra money for home improvements.

    Borrowers who may benefit from a home renovation loan are contemplating home improvement ideas.

    • Are you looking to modernize a kitchen or bathroom(s)?
    • Are you looking to remodel a home to fit your lifestyle and family needs?
    • Are you wanting to add one or more rooms to the house?
    • Are you contemplating the purchase of a home with a low asking price but in need of serious work?

    Additionally, these types of loans give more homeowners and/or borrowers more control over building equity. By making improvements and substantial upgrades, these projects will improve the value of the property in the long run.

    Some types of home renovation loans available include conventional renovation loans, FHA renovation loans, USDA renovation loans, and VA renovation loans.

    Conventional Renovation Loans at a glance:

    • Low fixed rates that are locked prior to closing and guaranteed.
    • PITI (principal, interest, taxes, and insurance) payments are due during the renovation period.
    • Closing costs can be rolled into the loan.  Ask us how. 
    • 97% financing available
    • 620 minimum FICO score required

    FHA Renovation Loans at a glance:

    • Low fixed rates that are locked prior to closing and guaranteed.
    • PITI (principal, interest, taxes, and insurance) payments are due during the renovation period.
    • Closing costs can be rolled into the loan. Ask us how.
    • Up to 96.5% financing available
    • 620 minimum FICO score required

    VA Renovation Loans at a glance: 

    • Low fixed rates that are locked prior to closing and guaranteed.
    • PITI payments are due during the renovation period.
    • Closing costs can be rolled into the loan. Ask us how.
    • 100% financing available (90% on refinance transactions)
    • 620 minimum FICO required
    • Repairs must be non-structural

    USDA Renovation Loans at a glance:

    • Low fixed rates that are locked prior to closing and guaranteed.
    • PITI payments are due during the renovation period.
    • Closing costs can be rolled into the loan. 
    • 100% financing available
    • 620 minimum FICO score required

    While they are similar in that banks and other approved lenders issue them, they differ greatly in type and who qualifies.

    The Federal Housing Administration insures FHA-Insured Loans. Though the FHA does not have income requirements, borrowers need to prove their income, and there are limits on loan amounts. 

    VA Loans are available to veterans who have served or are currently serving in the armed forces, reservist/national guard members, or an eligible surviving spouse. The Department of Veteran Affairs guarantees these types of loans. Borrowers must also have a Certificate of Eligibility (COE). The COE proves that the applicant officially meets the minimum military service requirements. This type of loan is only available through certain VA-approved lenders. 

    The U.S. Department of Agriculture (USDA) loans are for homes in rural areas, though many other suburban communities and locations are also able to qualify. The loan is subsidized through the USDA. Borrowers must demonstrate stable income and the ability to make payments without incident for at least 12 months based on assets, savings, and income. 

    HomeLander Mortgage will be there every step of the way to help borrowers determine which type of renovation loan is appropriate to their budget, needs, and qualifications. Schedule a call to begin the process at www.homelandermortgage.com

  • The Differences Between a VA, FHA, and USDA Mortgage

    The Differences Between a VA, FHA, and USDA Mortgage

    The Differences Between a VA, FHA, and USDA Mortgage

    There are various loan types and programs available for homebuyers. These include FHA-insured, VA-guaranteed, and USDA Mortgage loans. While they are all similar in that they are issued by banks and other approved lenders, they differ greatly in type and who qualifies.

    FHA Loans

    FHA-Insured Loans are insured by the Federal Housing Administration. If a homeowner defaults on their loan and the house isn’t worth enough to fully repay the debt through a foreclosure, the FHA compensates the lender for the loss. 

    Since this type of mortgage loan is government-insured, lenders are able to offer competitive terms, including low down payments (as low as 3.5%). 

    FHA loans are also easier to qualify for than conventional mortgages.  Borrowers with lower credit scores – even as low as 500 – may be found eligible for this type of loan depending on the circumstances. However, to qualify for the lowest down payment, a score of 580 or higher is required.

    FHA-insured loans also have maximum loan limits that vary depending on the average cost of housing in a specific region. 

    Borrowers also have to pay a “mortgage insurance premium” (MIP) as part of an FHA loan. While most conventional mortgages have PMI (Private Mortgage Insurance),  MIP is what borrowers pay to contribute to a Mutual Mortgage Insurance Fund. FHA uses this fund to pay lenders’ claims if a borrower defaults.

    FHA loans also require a property appraisal from an FHA-approved appraiser. Additionally, if borrowers are behind in their mortgage payments, with an FHA loan, they have access to special loss mitigation options.

    Though the FHA does not have minimum income requirements, borrowers need to prove they can afford the loan they are seeking, and there are limits on loan amounts. With FHA loans, there is also the upfront mortgage insurance premium that is due at closing, but is rolled into your loan for you.  

    As of 2019, the agency has tightened the underwriting requirements for FHA-insured loans. Four to five percent of the total mortgages that the FHA insures on an annual basis—which would have previously been approved automatically – will now be put through a more rigorous manual underwriting review.

    VA Loans

    The VA loan program is available to veterans who have served or are serving in the armed forces, a reservist/national guard member, or an eligible surviving spouse. These types of loans are insured by the Department of Veteran Affairs. VA loans typically do not require any money down. 

    Borrowers need a satisfactory credit score but are allowed some flexibility in debt-to-income criteria. Borrowers must also have a VA Certificate of Eligibility (COE). The COE proves that the applicant officially meets the minimum military service requirements. This type of loan is only available through VA-approved lenders. With the VA guarantee, lenders are protected against a portion of the loss if the borrower defaults.

    VA loans usually come with low-interest rates. Additionally, there are up to 30 years of loan terms available for your mortgage. Most importantly though, with a VA loan, no PMI is required. That means there is no extra expense to the borrower for mortgage insurance on top of their normal monthly mortgage payment. Additionally, with a VA loan, there is no prepayment penalty.

    Borrowers do, however, normally pay a funding fee to VA. This is a one-time charge of between 1.3%-3.6% of the total loan amount, depending on the down payment and if the veteran has used the VA loan benefit before.  The VA funding fee can be rolled into the loan.  Additionally, veterans with a service-related disability of 10% or more are exempt from paying the VA funding fee. 

    As the VA does not lend directly, borrowers have to find their own VA-approved lender. 

    USDA Loans

    The U.S. Department of Agriculture (USDA) offers one of the most overlooked mortgage loan programs. USDA loans are for rural areas, though many other suburban communities and locations are also able to qualify. This loan makes purchasing a home more affordable for low-income individuals living in these designated areas.

    With a USDA loan, borrowers can secure a home with zero to low-down-payment as well as low-interest rates. The loan is subsidized through the USDA. Borrowers can also qualify for a USDA loan with a lower than average credit score.

    Since USDA loans are for families who demonstrate economic need, the qualifying adjusted gross income can not exceed more than 115% of the median income in the specified area. 

    Borrowers must demonstrate stable income and the ability to make mortgage payments without incident for at least 12 months based on assets, savings, and income.

    Lenders also take the debt-to-income (DTI) ratio into consideration with a recommended DTI of 44% or lower. Additionally, many lenders will require a credit score of 640 or more.

    The house must be the primary home and cannot be a working farm and the home appraisal must meet USDA standards.

    USDA loans come with upfront and annual guarantee fees. The annual fee is added to the monthly payment and lasts for the life of the loan. The USDA monthly guarantee fee is typically lower than PMI or the FHA MIP.  And borrowers can roll the upfront guarantee fee into the loan. These fees are similar to MIP and go towards the funding of the USDA loan program and guarantee. 

    Closing costs can also be rolled into the loan as long as the home appraises for enough to cover it. Additionally, borrowers who already have a USDA loan can refinance it into a new USDA loan.

    HomeLander Mortgage will be there every step of the way. Schedule a call to begin the process at www.homelandermortgage.com