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©
2002 Ruth E. Campbell. |
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Frequently Asked Questions Mortgages
- Q & A Q: How does FHA work?
A: The U.S. Department of Housing and Urban Development
offers a variety of loan insurance programs through the Federal
Housing Administration which require approximately 3 to 5 percent
cash down. FHA loan limits vary depending on the county where
the property is located. FHA loans administered by HUD are originated
by private lenders. For more information, contact lenders who
offer FHA loans or a regional HUD office. Resources: * "FHA Forms, Booklets and Publications,"
U.S. Department of Housing and Urban Development Printing Branch,
Room B-100, 451 7th St., Washington, DC 20410; call (800)767-7468. Q: Which lenders offer FHA loans?
Q: Do FHA loans require impound accounts?
Q: How do you find government-repossessed homes?
A: The U.S. Department of Housing and Urban Development
acquires properties from lenders who foreclose on mortgages
insured by HUD. These properties are available for sale to both
homeowner-occupants and investors. You can only purchase HUD-owned properties through a licensed
real estate broker. HUD will pay the broker's commission up
to 6 percent of the sales price. Down payments vary depending on whether the property is eligible
for FHA insurance. If not, payments range from the conventional
market's 5 to 20 percent. One caution. HUD homes are sold "as is," meaning
limited repairs have been made made but no structural or mechanical
warranties are implied. Q: What are rates for FHA and VA loans?
Q: Can I get a HUD home for as little as $100 down?
A: If you are strapped for cash and looking for a bargain,
you may be able to buy a foreclosure property acquired by the
U.S. Department of Housing and Urban Development for as little
as $100 down. With HUD foreclosures, down payments vary depending on whether
the property is eligible for FHA insurance. If not, payments
range from 5 to 20 percent. But when the property is FHA-insured,
the down payment can go much lower. Each offer must be accompanied by an "earnest money"
deposit equal to 5 percent of the bid price, not to exceed $2,000
but not less than $500. The U.S. Department of Veterans Affairs also offers foreclosure
properties which can be purchased directly from the VA often
well below market value and with a down payment amount as low
as 2 percent for owner-occupants. Investors may be required
to pay up to 10 percent of the purchase price as a down payment.
This is because the VA guarantees home loans and often ends
up owning the property if the veteran defaults. If you are interested in purchasing a VA foreclosure, call
1-800-827-1000 to request a current listing. About 100 new properties
are listed every two weeks. You should be aware that foreclosure properties are sold "as
is," meaning limited repairs have been made but no structural
or mechanical warranties are implied. Q: Are there programs for fixer-uppers?
A: If you need home loan to buy a "fixer-upper"
and remodel it, look at the U.S. Department of Housing and Urban
Development's Section 203(K) loan program. The program is designed
to facilitate major structural rehabilitation of houses with
one to four units that are more than one year old. Condominiums
are not eligible. A 203(K) loan is usually done as a combination loan to purchase
a "fixer-upper" property "as is" and rehabilitate
it, or to refinance a temporary loan to buy the property and
do the rehabilitation. It can also be done as a rehabilitation-only
loan. Investors must put 15 percent down while owner-occupants are
required to come up with only 3 to 5 percent. HUD requires that
a minimum of $5,000 be spent on improvements. Two appraisals are required. Plans and specifications for
the proposed work must be submitted for architectural review
and cost estimation. Mortgage proceeds are advanced periodically
during the rehabilitation period to finance the construction
costs. Q: Are there gov't programs for rehab?
A: The U.S. Department of Housing and Urban Development's
Section 203 (K) rehabilitation loan program is designed to facilitate
major structural rehabilitation of houses with one to four units
that are more than one year old. Condominiums are not eligible. The 203(K) loan is usually done as a combination loan to purchase
a fixer-upper property "as is" and rehabilitate it,
or to refinance a temporary loan to buy the property and do
the rehabilitation. It can also be done as a rehabilitation-only
loan. Plans and specifications for the proposed work must be submitted
for architectural review and cost estimation. Mortgage proceeds
are advanced periodically during the rehabilitation period to
finance the construction costs. For a list of participating lenders, call HUD at (202) 708-2720. If you are a veteran, loans from the U.S. Department of Veterans
Affairs also can be used to buy a home, build a home, improve
a home or to refinance an existing loan. VA loans frequently
offer lower interest rates than ordinarily available with other
kinds of loans. To qualify for a loan, the first step is to
apply for a Certificate of Eligibility. Another program is the Federal Housing Administration's Title
1 FHA loan program. Resources:* "Rehab a Home With HUD's 203(K)" brochure,
U.S. Department of Housing and Urban Development, 7th and D
streets S.W., Washington, DC 20410. Q: Do you have to buy HUD homes through a realty agent?
Q: Rules for a FHA Loan?
A: The U.S. Dept. of Housing and Urban Development offers
a variety of loan insurance programs through the Federal Housing
Administration, which requires approximately 3 to 4 percent
cash down. There are no income requirements to qualify for a
FHA mortgage. Other advantages are that FHA loans do not contain
prepayment penalties and in some cases they are assumable by
qualified purchasers. FHA loan limits vary, depending on the county where the property
is located. FHA loans are originated and serviced by private
lenders. FHA does not lend money. The mortgage is made by a bank, savings
and loan, mortgage company or other FHA-approved lender. In
addition, FHA does not set the rates and points. The lender
determines these, so it is best to shop around by calling several
FHA-approved lenders. Q: Are FHA loans assumable?
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