| 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:
* "FHA Forms, Booklets and Publications," U.S. Department of
Housing and Urban Development Printing Branch, Room B-100, 451 7th St.,
Washington, DC 20410; call (800)767-7468.
|
|
| 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. |
|
| Q: |
Do FHA loans
require impound accounts? |
| A: |
Yes,
according to the "Realty Bluebook," 30th Ed., Dearborn
Financial Publishing, Chicago; 1993: "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." |
|
| 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.
|
|
| 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 to request 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 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 must put 15 percent down while 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.
|
|
| Q: |
Are there
gov't 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 Fedeal 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, 7th and D streets S.W., Washington, DC
20410.
|
|
| 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.
|
|
| Q: |
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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