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Q: |
How does FHA
work? |
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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. |
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Q: |
Which lenders
offer FHA loans? |
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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. |
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Q: |
Do FHA loans
require impound accounts? |
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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." |
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Q: |
How do you
find government-repossessed homes? |
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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. |
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Q: |
What are rates
for FHA and VA loans? |
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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. |
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Q: |
Can I get a
HUD home for as little as $100 down? |
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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.
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Q: |
Are there
programs for fixer-uppers? |
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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.
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Q: |
Are there
gov't programs for rehab? |
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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. |
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Q: |
Do you have to
buy HUD homes through a realty agent? |
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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. |
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Q: |
Rules for a
FHA Loan? |
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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. |
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Q: |
Are FHA loans
assumable? |
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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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