What Is The FHA?

The Federal Housing Administration (FHA), is an agency of the federal government. The FHA insures private home loans that are issued for new and existing housing, refinancing mortgages, and loans that are approved for home repairs.

An FHA loan or FHA refinance mortgage allow you to purchase or refinance a home with a low down payment. FHA insured loans are great for the first time home buyer.

Created by congress in 1934, the FHA became part of the Department of Housing and Urban Development Office of Housing (HUD) in 1965. Today the mission of the FHA includes helping borrowers get amounts they qualify for, and assisting lenders by reducing their risk in issuing loans.  Because HUD insures your loan your lender can offer three primary benefits of for your FHA Loan:

1. Easy credit qualifying.

2. Low closing costs.

3. Low down payments.

Applying for a FHA Loan

The FHA asks for a lot of information on your FHA Loan application. You will need to provide the FHA with a wide range of details including:

All addresses where you have lived in the previous two years.

Your employer's name and addresses for the last two years.

The amount of your gross monthly salary.

W2s for the past two years.

Income tax forms submitted for the last two years.

Make sure that you gather all of your information before you begin your FHA application so you will have everything handy to complete your FHA loan forms at one time.

Popular FHA Loans

The 203(b) FHA Fixed Rate Mortgage Loan Program is the widely used FHA Home Loan, especially among first time home buyers. The 203(b) FHA loan keeps your down payment to a minimum. Your closing costs may also be reduced.

The 203(b) FHA loan will finance up to ninety-seven percent of your loan. You must qualify with some debt-to-income ratios, but the 203(b) does not have a minimum income requirement.

Check with a financial planner about your debt to income ratio, or discuss your financial status with a lender. Find out how to maximize your credit rating before you apply for your FHA Loan.

Improving Your Credit Score for FHA Loans

Your FHA loan approval depends on your good credit.  If you have a poor credit rating, work to establish payment reliability over a period of at least one year before starting your FHA loan paperwork. 

Try paying down and closing one or two credit cards, which can improve your credit rating by showing you have less potential debt open to you through credit cards. 

If you have erroneous items on your credit rating, challenge them in writing with the major credit reporting agencies and resolve them before you begin work on the FHA mortgage.

FHA Refinance Mortgage Options

Homeowners enjoy the benefits of investing in their property year after year. For some, there comes a time when that investment can come in handy. Refinancing with an FHA Loan can prove to be an effective way to put that equity to work. 

Sending a child to college, consolidating bills, taking a much needed vacation, or making home improvements are some of the ways homeowners tap into the equity they have accumulated in their home to help with these expenses.

Keep in mind that FHA refinancing is only available to homeowners who are currently using their home as their principal residence.  FHA offers several different options to homeowners who are considering an FHA refinance mortgage:

FHA Refinance: Cash Out Refinancing

This refinancing option is especially beneficial to homeowners whose property has increased in market value since the home was purchased.

A Cash Out refinance allows homeowners to refinance their existing mortgage by taking out another mortgage for more than they currently owe, therefore repaying their current mortgage and using the equity they have built up in their home to take out another larger mortgage.

This allows the homeowner to access the equity they have built up in their home and put it to good use where needed.  In order to get the most benefit from refinancing your mortgage, it is often best to consider refinancing after you have had time to build up a significant amount of equity in your home.

If the property was purchased more than one year prior to the refinance, the homeowner can refinance the existing mortgage for up to 85 percent of the appraised value plus the allowable closing costs, which vary from state to state.

FHA Refinance: Streamlined Refinancing Basics

This refinancing option is considered streamlined because it allows you to reduce the interest rate on your current home loan quickly and oftentimes without an appraisal.

FHA Streamlined Refinance also cuts down on the amount of paperwork that must be completed by your lender saving you valuable time and money.

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The official U.S. Government FHA Web site is HUD.gov