FHA LOANS (FEDERAL HOUSING ADMINSTRATION)
FHA loans are loans that are underwritten by direct endorsed FHA lenders and underwriters to meet FHA credit, borrower, and minimum property requirements (1 to 4 unit owner occupied properties). In exchange, FHA/HUD provides explicit government guarantee on the loan in the form of Mortgage Insurance (MIP). FHA loans have both an upfront mortgage insurance premium and a monthly mortgage insurance premium that is included in the borrower’s monthly mortgage payment. Different sections of the act indicate different types of FHA loans. The most common is FHA 203B (standard FHA). Other types include FHA 203K (renovation loans) and HECM (Home Equity Conversion Mortgages, aka Reverse Mortgages). Most lenders provide their own overlays to their FHA production. Prosperity/WFHM is more generous than most, details listed here. FHA loan limits vary by county, and can be verified on HUD’s website.
FHA 203K (standard FHA) purchase renovation loans.
In short, FHA 203K Renovation loans are a single close single loan that includes costs of purchasing the home and renovations. Maximum mortgage amount and minimum amount of 3.5% dow payment are calculated from the total acquisition cost (price plus renovations). The formula can be complicated and will vary depending on the property
specifics. Consultant lender prior to writing offer to determine loan amount and down payment.
—Seller assist limit on FHA 203K is max 6% of the agreement of purchase price.
FHA Home Equity Conversion Mortgage loans (aka Purchase Reverse Mortgages).
Reverse mortgage loan amount and required down payment are determined using a calculation that factors in date of birth for youngest borrower on title, valuation of property and county of property. Lender completes this calculation.
—Currently, Reverse Mortgages do not permit any seller assist.