What is an FHA Loan?
Federal Housing Administration or FHA
FHA is a low down payment alternative to conventional and other financing. FHA is a federally insured loan. It requires monthly mortgage insurance. The down payment requirement is only 3.5% and the interest rates are lower than most financing options. Income and credit score requirements are lower which allows buyers to qualify for a higher price range of homes. FHA has become the most popular loan for first time home buyers. Once considered an expense loan with outrageous mortgage insurance premiums has really come around. In 2015 the annual mortgage insurance premium was reduced by nearly 40%. FHA is a great option to explore.
Why is FHA a Good Choice?
- Low Down Payment (3.5% of the Purchase Price)
- FHA Rates are usually lower than Conventional Loans
- Low Credit and Income Requirements making this option available to more buyers
- FHA has a higher level of tax deductions (Mortgage Insurance, Upfront costs)
- FHA has Streamline Refinance Options that don’t require an appraisal
- FHA refinance cash out limits up to 85% of your homes value (alternatives capped at 80%)
- FHA allows you to consolidate mortgage debt up to 98.75% of your home’s value
Pre-Qualify for an FHA Loan Now FHA Loans offer more Tax Savings
FHA loans offer attractive tax deductions at the end of the year. FHA mortgage insurance premiums are tax deductible. Mortgage Insurance Premiums paid are a tax deduction in which to itemize along with your mortgage insurance. Mortgage interest paid is summarized on a 1098-I, which you get at the beginning of the year for the previous year. Mortgage insurance premiums are not summarized which make them easy to forget. Save your Closing Disclosure from your loan closing. The year you closed your loan you will be able to deduct the Upfront Mortgage Insurance Premium associated with a new FHA loan. Also every monthly mortgage payment you make, the mortgage insurance premium is also tax deductible. A good practice is to save your monthly mortgage statements as part of your record keeping for tax season.
Other Benefits to FHA Loans
- FHA Loans can be assumed or “taken over” by another without selling your home
- FHA to FHA refinances can be done with no closing costs or appraisal
- Mortgage Insurance Premiums are eligible to be refunded when terminated
- FHA Loans can be paired with down payment assistance programs and loan options
- FHA Loans can be used to buy HUD owned homes with a streamlined process
Contact us now to see if an FHA Loan is right for you.
The New Homeowner Center at Summit Mortgage wants to offer a level of service above your expectations. We know that communication is the most important thing about your home buying process. We make ourselves available on your time. Call us today, or whenever. Let us know how we can help. We want your feedback.