Adobe Financial Corporation

FHA loans have been helping people become homeowners since 1934. The Federal Housing Administration (FHA) – which is part of HUD – insures the loan, so your lender can offer you a better deal.

• Low down payments
• Low closing costs
• Easy credit qualifying

The purchase of a house that needs repair is often a catch-22 situation, because the bank won't lend the money to buy the house until the repairs are complete, and the repairs can't be done until the house has been purchased.

HUD's 203(k) program can help you with this quagmire and allow you to purchase or refinance a property, plus include in the loan the cost of making the repairs and improvements. It is available to persons wanting to occupy the home.

The downpayment requirement for an owner-occupant (or a nonprofit organization or government agency) is approximately 3.5% of the acquisition and repair costs of the property.

FHA has permitted streamline refinances on insured mortgages since the early 1980's. The "streamline" refers to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved in the transaction.

Lenders may offer streamline refinances and include the closing costs into the new mortgage amount. This can only be done if there is sufficient equity in the property, as determined by an appraisal. Streamline refinances can also be done without appraisals, but the new loan amount cannot exceed the original loan amount. Investment properties (properties in which the borrower does not reside in as his or her principal residence) may only be refinanced without an appraisal.

Advantages:

• Lower initial monthly payment
• Rates and payments may go down if rates decrease
• May qualify for higher loan amounts

Disadvantages:

• More risk
• Payments may change over time
• Potential for higher payments if rates increase

Advantages:

• Only borrow what you need
• Pay interest only on what you borrow
• Flexible access to funds
• Interest may be tax deductible
• May be free of closing costs
• Can be used for debt consolidation and to lower payments
• Rates are usually lower than consumer loans or credit card rates

Disadvantages:

• Rates can change
• Payments can change
• Harder to refinance your first mortgage