FHA Lending: More than Your Average Mortgage

by SMD 

The Federal Housing Administration, or FHA, is well known for giving loans to help first time buyers and those with less than perfect credit become homeowners. Less well known are the many other programs offered by the FHA to help with everything from disaster relief to streamline refinancing. Here’s a look at a few of those programs.

Section 203(h) Mortgage and Disaster Relief
A section 203(h) is a special mortgage for individuals who have been affected by a Presidentially declared disaster who are trying to restore or rebuild their home. These loans require no down payment and have lower fees than most loans. The FHA also has a disaster relief program that freezes foreclosures on homes when homeowners have been seriously affected by a disaster.

Section 203(k) Rehabilitation Mortgage
The main benefit of a 203(k) Rehabilitation Mortgage is that it can be used to cover the acquisition and the rehabilitation of a property, allowing the buyer to avoid having to take out two separate loans. Not only is the 203(k) a great program in itself, but HUD and many other organizations have created programs to assist rehabbers that are specially designed to bundle 203(k)s with other loans. This makes it much easier for rehabbers to cover the full amount of the property. There is also a streamlined 203(k) that allows for up to $35,000 additional financing into a mortgage to be used for home improvements.

Streamline Refinance
An FHA streamline refinance is a great way to refinance your house with a relatively small amount of paperwork and in a short period of time. Currently, the original loan must be an FHA loan, but this maybe be changing in the near future. The original loan must be in good standing and the refinance must lower the monthly payments. Some lenders will allow borrowers to avoid the closing costs by charging a slightly higher interest rate. Every lender is different, making it critical that borrowers check to make sure they meet the FHA’s and the lender’s criteria.

Energy-Efficient Mortgage Program
The FHA Energy-Efficient Mortgage, or EEM, is a great way to lower monthly utility bills and increase the value of a home. Usually when an individual wants to make any home improvement (energy efficient or otherwise), he or she would have to take out a second mortgage. However, an EEM allows the borrower to package this money in with their mortgage. A borrower can receive up to 5% of their FHA mortgage total (not to exceed $8,000) or $4,000, whichever is higher. To be eligible for an EEM, an inspection must verify that the long term savings from the upgrades will be greater than the cost of the loan.

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