FHA Loan

From 1st Colorado Mortgage Solutions

What is a FHA Home Loan?

The FHA program was developed to make loans more accessible to those who could only afford a low-down payment or those who has a less than perfect credit score. Though they were originally intended to help borrowers with low credit, the FHA program is now popular with a wider group of borrowers.
A less than perfect credit score doesn’t have to mean the end of the line when searching for a home. Getting an FHA home loan may be the key to your homeownership.

FHA Benefits

  • Low 3.5% down payment
  • FICO scores from 620
  • First-time home buyer advantages
  • Gift funds are permissible for 100% of down payment
  • Credit and underwriting standards are less restrictive
  • Low closing costs

FHA Loan Products/Loan Terms

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 Adjustable Rate Mortgage (ARM)
  • Upfront Mortgage Insurance Premium can be financed into loan amount
  • Annual Mortgage Insurance Premium (paid monthly)

FHA Loan Purchase

FHA insured mortgages are historically the most popular choice for home buyers and home owners without a large down payment or with less than perfect credit. Many people think that you have to be a first-time buyer to use an FHA insured mortgage to buy a home, and this is simply not true. Also, FHA credit and underwriting standards are less restrictive than conventional financing options. Getting a FHA home loan may be your key to home ownership.

FHA Benefits

  • Low 3.5% down payment

  • FICO scores from 620

  • First-time home buyer advantages

  • Gift funds are permissible for 100% of down payment

  • Credit and underwriting standards are less restrictive

  • Low closing costs

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FHA Refinance

Whatever the reason for refinancing your home, 1st Colorado Mortgage Solutions can help.
Sometimes personal changes, or interest rate changes in the mortgage loan market, may result in the desire to refinance your FHA mortgage loan. The “FHA Streamline Refinance” is designed to help lower your monthly mortgage payment without going through the full loan qualification process.

Benefits of an FHA Streamline:

  • No out-of-pocket costs
  • No income verification
  • Lower rates
  • Pay your loan off faster by going to a lower term
  • Defer two mortgage payments
  • No appraisal required
  • No max loan to value

A mortgage refinance essentially involves acquiring another mortgage to replace an existing one. There are two main types of FHA refinances, “regular” and “streamline.” Each type has a different purpose and process that borrowers must go through.
There are many reasons for getting a regular FHA refinance, including paying off an existing mortgage, divorce or property settlement, or utilizing the “cash-out” option. The regular refinance can be used to pay off an existing mortgage, whether it is conventional, VA or FHA. Additionally, a “cash-out” refinance can be used when the borrower wishes to borrow against their house and take out a portion of their home’s equity in cash. That cash can then be used to pay off debt or finance other purchases.
Conversely, if the borrower’s fixed rate monthly mortgage payment is too high, they may want to temporarily switch to an adjustable rate mortgage, depending on the state of the mortgage loan market. Another option for a borrower in this situation would be to refinance to a loan with a longer term, in which the monthly payments would also go down. No cash can be taken out on “streamline” mortgage refinances.

FHA 203k Renovation Loan

A 203k renovation loan allows you to finance not one, but two major items. It allows you to finance the home itself but, also the needed renovations and repairs, using only one loan. A 203k renovation loan simplifies the process of buying a home and then finding funds for renovations. This is a great option if you are looking to purchase a fixer-upper and grow your equity.

FHA 203k Renovation Loan Guidelines

  • The home must meet certain safety and livability standards prior to getting the loan
  • FICO scores from 620
  • FHA requires a 3.5% down payment based on the purchase price + total project cost.
    • Home price: $200,000
    • Total project cost: $25,000
    • Down payment: $7,875 (3.5% of $225,000)
  • You can receive 100% of your down payment requirement as a gift from family or approved non-profit organization.
  • You must live in the house you are planning to buy

Types of 203k Renovation Loans

203k Streamline

  • This option allows you to do minor repairs rather than full out renovations. The limit to the streamline option is $35,000 plus a “buffer” equal to 15% of the total bids. The buffer is a “just in case” fund to cover cost overruns by your contractor. If the buffer is not used, it is credited back to you. You cannot do anything structural with a 203k streamline.

203k Standard

  • This would be the loan to use if you plan on doing multiple structural alterations on the house you are purchasing. You cannot do non-permanent changes or add luxury amenities, but you can do many large home renovations.

Private Mortgage Insurance Breakdown

Private Mortgage Insurance is a policy that protects lenders against losses resulting from defaults. For an FHA loan, the Federal Housing Administration requires insurance that comes with both an annual premium, and an upfront premium. You can pay the upfront premium at closing or you can roll it into your loan amount. If an FHA loan is ideal for your financial situation, PMI is something that will need to be in your loan.

Our Core Values

  • Honesty, Integrity, and Competence

  • Assist our clients through any roadblock that may arise

  • Help you reach your homebuyer dreams

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