Essential Things Everyone Should Know About FHA Loans

FHA Multifamily LoanFHA loans are mortgages insured by the FHA. These loans are issued by lenders approved by the FHA and unlike conventional loans, are backed by the government. This means that lenders are protected against defaults, so they can offer borrowers better interest rates on loans that are considered riskier.

Can You Take Another Loan?

The FHA allows you to take out a second loan on top of your FHA loan, but a majority of home equity mortgages restrict the combined LTV or CLTV between 85% and 95%. This means that you will require sufficient equity prior to getting a second loan like HELOC or home equity line of credit. Bonneville Multifamily Capital noted that you could likewise use an FHA multifamily loan to fund one to four unit residential dwellings, such as mobile homes, manufactured houses, apartments, condominiums, and multifamily properties.

It is important to note that in general, you can only take out one FHA mortgage at a given time period to limit the risk of borrowers defaulting on their loans. There are specific exceptions and circumstances, however, which may enable borrowers to have more than one FHA mortgage.

The Different FHA Loan Types

The FHA or Federal Housing Administration has insured approximately 34 million loans since they started their loan programs. They offer several loan programs for homebuyers, including Home Equity Conversion Mortgage (HECM) or reverse mortgage program specifically for seniors.

FHA loans can be for refinancing and buying properties. Similar to conventional loans, they can either be fixed-rate or adjustable rate mortgages. In general, the maximum loan-to-value or LTV ratio for a cash-out mortgage is 95%. This is in consideration if the overall loan amount is not more than $417,000 and a majority of lenders have an 85% LTV cap. If you have an existing FHA loan and want to refinance it, FHA’s streamline refinance programs are a good option that offers flexibility even if you don’t have sufficient home equity.

FHA loans are among the most practical mortgage offerings, considering that you satisfy all the requirements. While these are ideal options for many borrowers, you should still compare them with conventional mortgage programs to ensure that you get a good deal since there may be instances when a loan offering may be better than the other. In addition, be wary of deceitful lenders who will try to misinform you even if they’re approved by the FHA.