Thousands of Americans will become first time homebuyers in 2009
and will be searching for loans. One type of mortgage loans available is the
Federal Housing Administration
(FHA) loan. One of the reasons Federal Housing Administration loans are so popular is
because of their lower down payment requirements.
The FHA Provides Affordable Housing To Americans
The FHA, which was established in 1934, has one purpose - to provide affordable housing
to Americans. For first time homebuyers the FHA offers them the opportunity to purchase
a home with significantly less than the typical 10 to 20 percent down payment. Effective
January 01, 2009 new down payment rules went into effect at the FHA.
Down payment changes
FHA loan applications opened after January 01, 2009, will now require that potential
new homeowners have the ability to make a down payment of three and a half percent, which
is an increase over the three percent it had previously been. Another significant change
is that previously closing costs could be included. Closing costs and no longer allowed
to become that was down payment.
There were down payment programs that were available to help first time homebuyers
especially, including AmeriDream and
Nehemia. Unfortunately, both of these programs
have been phased out.
In spite of the new down payment requirements, the FHA still offers an extremely
affordable way for new homebuyers to purchase their home. The addition of the first time
homebuyer credit of $7,500.00, which will remain in effect until June 30, 2009 still means
the FHA, is better than other programs.
An additional benefit that is offered by the FHA loan is the backing of the Federal
Government. For a borrower, this means that a bank or mortgage lender is far more likely to
extend credit. It is helpful to keep in mind that the typical down payment is between ten
and twenty percent which are significantly more than the FHA program.
For homeowners who already have an FHA mortgage may be considering refinancing due to
lower rates. For those homeowners there are also new regulations that went into effect for all
loans that originate after January 01, 2009.
The most notable change is that any loan that exceeds 85 percent of the value of the property
will now require two appraisals. This change it also applies to loans over $417,000.00.
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Cash out refinances
For any homeowner considering an FHA cash out refinance, there are also
new guidelines that will apply to these loans. For cash out refinances up to 95%:
- For twelve months prior to the date of your application you must have lived in the home
- For twelve months prior to the date of your application all payments must have been on time
- Only homes classified as one or two family are eligible
- Second mortgages subordinate to the FHA are allowed
- All signers of the mortgage must occupy the property
In the event that the loan amount exceeds $417,000.00 the maximum cash out refinance
limit would be 85% of the value of the home. FHA cash out refinances can allow you a
number of opportunities to remodel, repair, or simply save money on your home. Make sure
you understand the 2009 changes to FHA loans as they apply to you.
See also: HOPE NOW,
Homeowner Stability Initiative