National Housing Act of 1934
-Introduced fully amortized loans & low down payments.
-Created Federal Housing Administration (FHA).
Purpose= Make home loans more affordable & accessible to buyers.
-Encourage home ownership & stimulate the economy.
FHA
- Federal Housing Administration (FHA).
- Purpose= Make home loans more affordable & accessible to buyers.
- Encourage home ownership & stimulate the economy.
What do FHA loans require?
These loans will require an appraisal and an inspection.
How does FHA work?
- FHA insures the riskiest part of the loan.
- Qualified lenders are then willing to make loans for borrowers with less >80% LTV.
LTV
Loan to value
What is the minimum down down payment needed for an FHA loan?
3.5%
What is the riskiest part of the FHA loan?
The 16.5%.
Desired % down (20%) - the FHA down payment requirement (3.5%)=16.5 (the riskiest part of the loan
Who insures the riskiest part of the loan in the event of a foreclosure?
FHA-Banks are only willing to lend in an FHA loan because the FHA insures it.
Who pays for mortgage insurance (MI) or private mortgage insurance (PMI)?
The buyer-it is rolled into their monthly payment.
What is the difference between MI & PMI?
MI (mortgage insurance):
-Payments remain for the life of the loan. Can never be removed.
-Homeowner would either need to sell or refinance to get out of MI.
PMI (private mortgage insurance):
-Is automatically discharged at 78% LTV.
What are the three types of FHA loans?
203(b): 1-4 Family
234(c): Condo
203(k): Rehab
How do loan limits and caps on purchases vary?
By state to state.
Check on HUD site for detailed information.
FHA loans are for
Primary residence only.
- Occupied for the majority of the year.
- Can establish residency after 1 yr. under FHA guidelines.
Benefits of the FHA loans?
- Low down payment.
- Easier to qualify (allow higher DTI ratio, lower FICO scores, etc.
- Competitive interest rates (rates are market driven).
- No prepayment penalties.
Who is eligible to use an FHA loan?
Anyone purchasing a property as their primary residence.
FHA approval process….
- Is similar to conventional.
- Based on buyer’s income, credit, down payment, & appraisal.
FHA does what?
- Insures loans, not makes them.
- FHA does not set rates either, rates are market driven.
Which FHA loans are assumable?
- FHA loans originated prior to 1989 are assumable.
- Cannot have a “due on sale” clause.
These loans will require appraisal and inspection.
- Veteran Affairs (VA) financing.
- Federal
- Established in 1944 as part of the GI bill.
- Similar to FHA, except there is no down payment requirement.
- There is a funding fee (can be rolled into the loan).
- For honorable discharged veterans & active duty members.
What are the benefits to a VA loan?
- No down payment requirement.
- Low or no FICO score.
- No mortgage insurance premium.
Which VA loans are assumable?
- VA loans originated prior to 1988 are assumable.
- Cannot have a “due on sale” clause.
USDA financing
- United States Department of Agriculture Financing.
- Loans, grants, & other financial programs for low/middle-income Americans.
- For purchasing homes or farmlands in rural areas.
- Offers renovation funds so owners can bring up to code in rural areas.
USDA multi-family housing program
- Rental housing to very low, low to moderate income households.
- Additional programs for elderly housing & those w/ disabilities.
Farm service agency
- Type of USDA financing.
- Provides loans to new farmers/ranchers who typically wouldn’t qualify.
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The Basics32
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Property Rights36
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Interests in Real Estate58
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Limitations on Property Rights52
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Property Valuation48
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Property Transfer57
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Contracts29
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Leases42
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Intro to Fair Housing19
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Fair Housing Law19
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Intro to Real Estate Financing40
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Contracts in Practice27
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Real Estate Agency & Real Estate Agency in Practice17
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Real Estate Financing50
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Government Financing Programs24
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Government Financing Regulations44
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Fair Housing in Practice24
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Massachusetts Licensing Law38
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Consumer Protection Law75
