FHA Loans for Pinellas Home Buyers

If you’re looking to finance a Pinellas short sale or Pinellas foreclosure and have 3.5% for a down payment, then an FHA loan is your ticket to home ownership.  The FHA is not a lender, nor do they set interest rates.  The Federal Housing Administration is a federal government agency (a division of the U.S. Department of Housing and Urban Development, or HUD), that offers mortgage insurance on loans originated by their approved lenders.   In a nutshell, it’s insurance that protects the lender in case the borrower defaults.

The FHA was created in 1934 after the Great Depression, and was widely popular until recent years when subprime lenders offered something seemingly better:  artificially low interest rates, no-interest payments and a false dream.  Daily, lender requirements are becoming more and more stringent, and, as a result, FHA loans are once again commonplace and the only vehicle for many to own their Duendin homes.

Advantages of an FHA loan include:

• low 3.5% down payment and closing costs
• gifts from family members, employers or charitable organizations are welcomed
• minimum credit scores are lower than for conventional loans
• lenders will consider payment of rent, utility bills and auto insurance premiums when evaluating the applicant

But Whoa! Hold on, there’s a tiny downside ….

• There’s a 1.75% of the loan amount premium that can be wrapped into the full loan term or paid at closing, regardless of their credit score
• You’ll pay an Annual Mortgage Insurance Premium or MIP.  It’s based on your loan-to value (LTV) ratio, which, if you’re putting 3.5% down, would be .55%.  Example:  $200,000 loan x .0055 = $1,100 divided by 12 months = $92 per month.  Usually this will drop off after five years or when the remaining loan balance is 78% of the value of the property – whichever is longer.
• FHA loans require that a property meet certain minimum appraisal standards.   In other words, if the home needs repairs, it may not qualify for a regular FHA loan.  There are FHA 203K loans that allow for repairs, but that will be the subject of another post!

If you need a referral to a trusted Pinellas Mortgage broker or banker, contact us.   While it’s important to shop for rates and fees, it’s actually equally important to use a representative that can actually get you to the closing table in today’s complex Pinellas real estate market.

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