A United States Federal Housing Administration mortgage
insurance backed mortgage loan which is provided by an
FHA-approved lender. FHA insured loans are a type of federal
assistance and have historically allowed lower
income Americans to borrow money for the purchase of a home that they
would not otherwise be able to afford.
To obtain mortgage insurance
from the Federal Housing Administration, an upfront mortgage insurance
premium (UFMIP) equal to 1.75 percent of the base loan amount at
closing is required, and is normally financed into the total loan amount by the
lender and paid to FHA on the borrower's behalf. There is also a monthly
mortgage insurance premium (MIP) which varies based on the amortization term
and loan-to-value ratio.
The program originated during the Great
Depression of the 1930s, when the rates of foreclosures and
defaults rose sharply, and the program was intended to provide lenders with
sufficient insurance. Some FHA programs were subsidized by the government,
but the goal was to make it self-supporting, based on insurance premiums paid
by borrowers. Over time, private mortgage insurance (PMI) companies
came into play, and now FHA primarily serves people who cannot afford a
conventional down payment or otherwise do not qualify for PMI. The
program has since this time been modified to accommodate the heightened
***3.50%*** down payment is required for an FHA loan.
MIP rates for FHA Loans over 15 years
A mortgage loan in the United States guaranteed by the United States Department of Veterans Affairs (VA). The loan may be issued by qualified lenders.
The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. Eligible areas are designated by the VA as housing credit shortage areas and are generally rural areas and small cities and towns not near metropolitan or commuting areas of large cities.
The VA loan allows veterans 103.3 percent financing without private mortgage insurance or a 20 percent second mortgage and up to $6,000 for energy efficient improvements. A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA; this fee may also be financed. In a purchase, veterans may borrow up to 103.3% of the sales price or reasonable value of the home, whichever is less. Since there is no monthly PMI, more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment. In a refinance, where a new VA loan is created, veterans may borrow up to 100% of reasonable value, where allowed by state laws. In a refinance where the loan is a VA loan refinancing to VA loan (IRRRL Refinance), the veteran may borrow up to 100.5% of the total loan amount. The additional .5% is the funding fee for an VA Interest Rate Reduction Refinance.
VA loans allow veterans to qualify for loan amounts larger than traditional Fannie Mae / conforming loans. VA will insure a mortgage where the monthly payment of the loan is up to 41% of the gross monthly income vs. 28% for a conforming loan assuming the veteran has no monthly bills.
The maximum VA loan guarantee varies by county. As of 1 January 2017, the maximum VA loan amount with no down payment is usually $484,350, although this amount may rise to as much as $726,525 in certain specified "high-cost counties"
***0%***This is one of the only real estate loan programs available that does not require a down payment.
A funding fee must be paid to VA unless the veteran is exempt from such a fee because he or she receives a minimum of 10% VA disability compensation. If a veteran is awarded disability compensation after paying a funding fee, he/she can apply for a refund of this funding fee, so long as the beginning date of the disability is prior to the closing date of the home mortgage.
In August 2012, Congress passed a bill that allows a Veteran to receive the benefits of having Veteran Disability while it is still pending. The amount paid for the funding fee can be refunded back to the Veteran when a determination is made and the paperwork is received.
The VA Funding fee may be paid in cash or included in the loan amount. Closing costs such as VA appraisal, credit report, loan processing fee, title search, title insurance, recording fees, transfer taxes, survey charges, or hazard insurance may not be included in the loan. However, the seller may pay these on behalf of the VA borrower.
Purchase Loans Funding Fee Grid
The VA funding fee can be financed directly into the maximum loan amount for the county in which the home is located. If the sales price and the financed VA funding fee total more than maximum loan amount for that county, the borrower or seller must pay for the fee out of pocket. All VA loans require an impound account for property taxes and homeowners insurance which makes the monthly payment of VA loans calculated as a PITI payment.