| 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:
U.S. Department of Housing and Urban
Development, 451 7th St., Washington,
DC 20410; call (202) 708-1112; hud.gov.
http://www.hud.gov/offices/hsg/fhahistory.cfm
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|
| Q:
|
Which
lenders offer FHA loans? |
| A:
|
Lenders who handle Federal
Housing Administration loans typically
advertise in the Yellow Pages under
"real estate loans" and
in the real estate sections of newspapers.
FHA also supplies limited lists of
approved lenders. For general qualifications
and program details, see the FHA brochure,
"How to Qualify for an FHA Loan."
To order, write the U.S. Department
of Housing and Urban Development,
Printing Branch, Room B-100, 451 7th
St., Washington, DC 20410; (800) 767-7468.
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|
| Q:
|
Do
FHA loans require impound accounts?
|
| A:
|
Yes, according to the "Realty
Bluebook," 33rd Ed., Dearborn
Financial Publishing, Chicago; 2003:
"Under FHA financing it is the
lender's responsibility to ascertain
that property taxes and hazard insurance
premiums are paid when due. Lenders,
therefore, will insist that the monthly
payments include proportionate amounts
for taxes and insurance."
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|
| 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.
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|
| Q:
|
What
are rates for FHA and VA loans? |
| A:
|
There are no set interest
rates for FHA and VA loans. The FHA
stopped regulating rates in 1983 and
the VA followed suit soon after. Shop
around for the best rate. |
|
| 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
or visit foreclosurefreesearch.com
for 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 a 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
no longer may participate - only
owner-occupants. 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.
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|
| Q:
|
Are
there government 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,
Washington, D.C.; brochure
online.
|
|
| Q:
|
Do
you have to buy HUD homes through
a realty agent? |
| A:
|
You can only purchase a U.S.
Department of Housing and Urban Development
property through a licensed real estate
broker. HUD will pay the broker's
commission up to 6 percent of the
sales price. |
|
| 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.
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| Q:
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Are
FHA loans assumable? |
| A:
|
Lenders will only permit those
loans that have a "subject to
transfer" clause to be taken
over through a formal assumption process.
Look to your loan agreement for specific
terms. In addition, you should candidly
discuss any risks with your lender,
and possibly consult an attorney before
signing the final agreement. |
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