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REALTORS®and FHA: Partners in Homeownership

FHA IMPROVEMENTS

BENEFIT YOU

REALTORS® AND FHA—WORKING

TOGETHER TO HELP PEOPLE FULFILL

THE AMERICAN DREAM

REALTORS® and the Federal Housing Administration (FHA),

which is part of the U.S. Department of Housing and Urban

Development (HUD), have been partners in creating

homeownership opportunities for more than 70 years. Since

FHA was created in 1934, it has helped more than 34 million

families become homeowners, many by working with their

local REALTORS® to achieve their dream of homeownership.

This brochure illustrates improvements in FHA programs that

will benefit you. Many aspects of the FHA mortgage application

process have been streamlined to make the process more userfriendly

and efficient. Upon reading this brochure, you will see

that FHA programs are a valuable asset to REALTORS®, other

real estate professionals, and most importantly, those seeking to

own a home.

Backed by the full faith and credit of the Federal government,

FHA-insured mortgages are one of the safest and most affordable

types of mortgages available to homebuyers. Working

together, REALTORS® and FHA help millions of families

come home.

WHAT IS FHA MORTGAGE

INSURANCE?

The Federal Housing Administration (FHA) insures

mortgages offered by banks, savings associations, and other

financial institutions. An FHA-insured mortgage is backed

by the full faith and credit of the United States government.

While FHA does not make loans, it benefits the homebuyer

by providing mortgage insurance which encourages financial

institutions to make affordable financing available.

WHAT ARE THE BENEFITS OF AN

FHA MORTGAGE?

FHA offers low down payment options, eligibility with less

than perfect credit, a loan at a reasonable cost, and help if

there is ever trouble making the mortgage payment.

Because an FHA mortgage insures the lender against loss,

an FHA mortgage typically has an interest rate that is

competitive with the best in your market and lower than

the rates charged for subprime and other non-prime

mortgages.

FHA not only helps people buy a home, but helps them keep

it as well. In return for protecting lenders against loss, FHA

requires financial institutions to offer assistance to borrowers

experiencing difficulty making mortgage payments.

WHAT ABOUT ELIGIBILITY?

In order to be eligible for an FHA-insured mortgage,

a borrower must:

• Occupy the property as the principal residence;

• Possess a valid Social Security Number;

• Have a two-year employment history;

• School and military service count towards this

two-year requirement.

• Not be delinquent on any Federal debt such as a student

loan or other FHA-insured mortgage; and

• Meet flexible credit requirements.

THERE ARE SEVERAL OTHER FEATURES

WORTH KNOWING ABOUT AN FHAINSURED

MORTGAGE:

• FHA adopted the industry appraisal standards permitting

the use of the Fannie Mae appraisal forms with no additional

specialized documentation, no Valuation Conditions form

or Homebuyer Summary.

• FHA has eliminated unnecessary requirements to make

minor repairs.

• The homebuyer and the seller, individually or jointly, can

pay closing costs as agreed to in the sales contract. FHA no

longer limits what closing costs the homebuyer is permitted

to pay.

• Caps on payment and debt-to-income ratios are more

generous than most standard conforming mortgage products.

The payment-to-income ratio may not exceed 31% and the

debt-to-income ratio may not exceed 43%.

• A minimum credit score is not required. In fact, one may

not be turned down for an FHA mortgage solely for lack of

credit history.

• The buyer’s entire cash investment—as little as three

percent—can be a gift from a family member, employer,

charitable organization or local government entity.

• The seller can contribute up to six percent of the home’s

price toward closing costs through a seller’s concession.

• There are no prepayment penalties on FHA-insured

mortgages.

• U.S. citizenship is not required but, for those who are not

citizens, they must be lawful permanent or non-permanent

resident aliens with a valid Social Security Number.

HOW ELSE CAN FHA ASSIST IN

ACHIEVING HOMEOWNERSHIP?

In addition to its standard Section 203(b) Mortgage Insurance

Program, FHA has a number of other valuable programs

designed to facilitate homeownership.

FHA Adjustable Rate Mortgage (ARM) Products

• FHA offers a standard 1-year adjustable rate mortgage

(ARM) as well as 3, 5, 7, and 10-year ARM options.

• ARM products may be good options for those who plan to

own the home for only a few years, expect an increase in

future earnings, or expect a decrease in interest rates.

FHA’s Limited Repair Program

• FHA’s Section 203(k) Limited Repair Program is an excellent

financing option for you whether buying or selling homes—

especially when repairs are identified during a home inspection

or appraisal—because it gives buyers the ability to make

repairs after closing.

• Buyers can finance up to an additional $35,000 into their

mortgage to pay for minor remodeling such as replacing

flooring, installing new appliances, and painting the interior

and/or exterior of the home.

IN ADDITION TO FHA, THE U.S.

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT (HUD)

OFFERS THESE RESOURCES:

HUD Homes

The Department has single-family homes in hundreds of

communities available for sale to the public. How do you

benefit from purchasing a HUD Home?

• Many HUD homes are available with FHA financing,

making it easier to purchase a home.

• The Department pays the real estate commission, if it is

included in the contract.

• Only a real estate professional licensed by the state and

registered with HUD can sell HUD homes.

For more information on available HUD homes, please visit:

www.homesales.gov

For more information on selling HUD homes, please visit:

www.hud.gov/groups/brokers.cfm

HUD-Approved Housing Counseling Agencies

Homebuyers often have a lot of questions about getting an

FHA-insured mortgage and about the home buying process in

general. HUD-approved Housing Counseling Agencies provide

buyers the opportunity to get the answers they need by meeting

with a housing counselor at a HUD-approved agency in their

community. These agencies offer homeownership counseling

and financial literacy training at little or no cost. To find a

counselor in your neighborhood, call 1.800.569.4287 or visit

http://www.hud.gov/buying/index.cfm and click on “find a

housing counselor” on the right under “counseling and

education.”

To learn more about these products or to find out if there are

homeownership programs sponsored by your state or local

governments and other community organizations, please visit

FHA’s website at www.fha.gov or call 1.800.CALL FHA.

For more information about the National Association of

REALTORS® and how we work with you, visit our website at

www.realtor.org.

October 2006

Item #126-128

National Association of REALTORS®

500 New Jersey Avenue, NW

Washington, DC 20001

Federal Housing Administration

U.S. Department of Housing

and Urban Development

451 7th Street, SW

Washington, DC 20410

The National Association of REALTORS®,

“The Voice for Real Estate,” is America’s largest trade

association, representing more than 1 million members

involved in all aspects of the residential and commercial real

estate industries. For more information, please visit

www.REALTOR.org.

The Federal Housing Administration (FHA)—which

is part of the U.S. Department of Housing and Urban

Development—has been helping people become homeowners

since 1934. FHA insures the loan, so lenders can

offer you a better deal. FHA offers loans with low down

payments, that are easier to qualify for, and can cost less

than conventional loans. For more information, please

visit www.fha.gov.



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