FHA - VA Mortgages

FHA and VA Mortgages

FHA mortgages are not mortgages from the government. How it works is the FHA insures mortgages made by qualified lenders to people to purchase or refinance their homes. FHA mortgage insurance help low to moderate income families purchase a home by lowering some of the costs of their mortgage loans. In addition FHA mortgage insurance encourages lenders to give loans to borrowers with less than perfect credit and finance projects that might not meet underwriting requirements. Protecting the lender against loan default on mortgages, guarantees the lender will receive payment should the borrower default. There also many benefits to the consumer with FHA mortgages. downpayment requirements are lower, conventional mortgages usually require a downpayment of at least 10 percent. An FHA mortgage can reduce downpayments to as little as 3 percent. FHA insurance allows borrowers to finance up to 97% of the value of their home purchase.

In conventional mortgages the borrower must pay closing costs 2-3 percent of the price of the home. FHA allows the borrower to finance many of these costs reducing the up front money needed to buy a home. FHA mortgage insurance is not free and borrowers are required to pay an insurance premium at the time of purchase as well as monthly premiums. FHA rules limit the fees that lenders may charge in making a loan. For example, the loan origination fee charged by the lender for the administrative cost of processing the loan may not exceed one percent of the amount of the mortgage. Also FHA sets a limit on the amount that may be insured. To make sure that its programs serves low to moderate income families FHA sets limits on the amount of the loan, this ranges from $81,500 to $160,000.

VA mortgages are guaranteed loans to eligible veterans to construct a residence to be owned and occupied by the veteran as a home. The loan may also include the purchase of the land on which the home will be built. To qualify for a VA loan you must be an eligible veteran who has available home loan entitlement. The loan must be for an eligible purpose and you must occupy or intend to occupy the property as your primary residense within a reasonable period of time. To qualify for a VA mortgage you must have enough income to meet the new mortgage payments and be able to cover the costs of owning a home. Also as in any mortgage you must prove that you can take care of other obligations and expenses, and still have enough income left over for family support and you must have good credit. Your spouse's income can be included for qualification.

To be elegible for a VA loan you must fall into one of the following criterias servicemembers, veterans, reservists national guard and qualifying unmarried surviving spouses. These loans can be used for the purchase of a home, condominium, manufactured homes or for refinancing loans. VA requires a down payment when the purchase price exceeds the appraised reasonable value of the property or the loan has a graduated payment feature.