RESPA stands for the Federal Real Estate Settlement Procedures Act. This video tells you about it all.
RESPA requires lenders to disclose information to potential customers throughout the mortgage process. By doing so, it protects borrowers from abuses by lending institutions.
RESPA mandates that lenders fully inform borrowers about all closing costs, lender servicing and escrow account practices and business relationships between closing service providers and other parties to the transaction.
For more information on RESPA, visit HUD.GOV or call 1-800-569-4287 for a local counseling referral.
The most common FHA program is the 203(b) FHA Loan. It offers a low down payment, flexible qualifying guidelines limited lender’s fees, and a maximum loan amount.
A 203(k) loan enables a home buyer to finance both the purchase and rehabilitation of a home through a single mortgage. A portion of the loan is used to pay off the seller’s existing mortgage and the remainder is placed in an escrow account and released as rehabilitation is completed.
Basic guidelines for 203(k) loans are as follows:
- The home must be at least one year old.
- The cost of rehabilitation must be at least $5,000, but the total property value – including the cost of repairs must fall within the FHA maximum mortgage limit.
The 203(k) loan must follow many of the 203(b) eligibility requirements. Lenders will know specifics about improvement, energy efficiency, and structural guidelines.
While this video simplifies things to help you remember, except for the addition of an FHA mortgage insurance premium, FHA closing costs are similar to those of a conventional loan.
As of 2013, the FHA requires a single, upfront mortgage insurance premium equal to 2.25% of the mortgage to be paid at closing (or 1.75% if you complete the HELP program).
This initial premium may be partially refunded if the loan is paid in full during the first seven years of the loan term.
After closing, you will then be responsible for an annual premium – paid monthly – if your mortgage is over 15 years or if you have a 15-year loan with an LTV greater than 90%.
The video explains the steps in FHA loans in more visual terms. With the exception of a few additional forms, the FHA loan application process is similar to that of a conventional loan.
With new automation measures FHA loans may be originated more quickly than before. And, if you don’t prefer a face-to-face meeting, you can apply for an FHA loan via mail, telephone, the Internet, or video conference.
Remember these points from the video:
- The FHA works to make home-ownership a possibility for more Americans.
- With the FHA, you don’t need perfect credit or a high-paying job to qualify for a loan.
- The FHA also makes loans more accessible by requiring smaller down payments than conventional loans.
In fact, an FHA down payment could be as little as a few months rent. And your monthly payments may not be much more than rent.