First in a series of articles about FHA mortgages:
In the current mortgage climate FHA mortgages are good deals for many home buyers with less than 20% down. The rates are competitive and in some cases lower than conventional mortgages.
FHA loans offer a loan guarantee for mortgage companies. If you acquire a FHA loan to purchase a home, the FHA is not actually lending money to you, the buyer; the FHA simply guarantees the lender in case you, the borrower, default on your mortgage payments.
1. All contracts should be for a 45 to 60 day settlement.
2. If the seller has owned the home for less than 90 days, the property is not eligible. If the seller has owned the home between 91 days and 1 year, a 2nd appraisal will be required. It must be paid for by the seller. This time frame is determined from the date of the deed to the date of the sales agreement (something to keep in mind if you’re buying a property that was bought by the seller to rehab and resell). Foreclosing banks, estates and relocation companies who are selling properties are exempt from this provision.
3. The maximum seller assistance is 6% of the purchase price. The buyer must contribute at least 3% of the purchase price toward the a combination of down payment ( 2.25%) and closing costs ( .75%).
4. The deposit check should be taken from an account of the buyer.
5. Every seller listed on the deed and every buyer involved in the transaction must be listed on the contract-with the proper spelling of their names.
6. The signatures of both buyer and seller must be witnessed by their prospective agents.
7. One the final contract price is agreed upon, the FHA Amendatory Clause Disclosure(PDF) needs to be signed by all buyers and sellers as well as the listing agent and selling agent.