What is an FHA Insured Loan?

Federal  Housing  Administration (FHA) insured  loans   are  made by  private lending  institutions  such as banks, savings and loans, or mortgage companies to eligible  borrowers for  the  purchase of  a  home. To  secure an  FHA loan,  a borrower must  apply  and  qualify  with  a  certified  FHA Lender.   Additionally, eligible  borrowers must   be  able  to  pay  a  minimum  of  3.5%   of  a  home's purchase price.  If the loan is approved, FHA will insure  a portion  of the loan's value to the lender.

This insurance protects the lender and allows them  to offer favorable financial terms to the borrower including:

• Low  required down  payment
• Competitive interest  rates
• Lower closing  costs
• Easy credit qualifying

What is the Process of Obtaining FHA Insured Loans?

CONTRACT  TO PURCHASE
After finding your desired home  and  negotiating a purchasing price with the  seller,  or selling  agent, you  will sign  a  purchase contract conditioned on approval of an FHA insured loan.

LOAN APPLICATION
Select a lender  and  complete their loan application. The lender  will obtain all your relevant credit information and request FHA to assign a licensed appraiser to determine the reasonable value for the property. You will be responsible for paying  for the credit  report  and  appraisal unless the seller agrees to pay instead. Either FHA or the lender  will issue  a value for property for loan purposes based on the appraisal.

LOAN DECISION
If the  established value  is acceptable to all parties and  the  lender determines that you are credit and income qualified,  the loan may be approved. Most lenders are authorized to make  this decision.

LOAN CLOSING
You (and  any  co-borrowers) attend the  loan  closing  and  sign  the note,  deed of trust  and  other  related papers. The lender  or closing agent will explain  the loan terms and  requirements as well as where an how to make  the monthly payments. (The loan closing  procedure may vary in some states.)

FHA Loan Benefits

FHA insured loans offer a number of benefits for both  lender  and  borrowers.  Since  1934, the  program   has   insured   over  35  million home mortgages.
In addition  to  the  favorable financial terms, FHA insured loans offer the following benefits:

• Equal opportunity for all qualified borrowers
• Required down payments as low as 3.5% of the purchase price
• Ability to finance up front Mortgage Insurance Premium
• Ability to finance the cost of repairing and/or improving a property in need of rehabilitation
• Right to prepay without penalty
• Credit Improvement in the qualifying process for some borrowers
• Availability in all areas of the country
• Default assistance and foreclosure prevention

Copyright 2012 Keller Williams® Realty, Inc. If you have a brokerage  relationship  with another agency, this is not intended as a solicitation.  All information  deemed reliable but not guaranteed.  Equal Opportunity Housing Provider. Each office is independently owned and operated.

Understanding the Advantages of CEMA: A Buyer's and Seller's Guide

by Cristina Callegari Kanellopoulos

When you are obtaining a mortgage in New York State the buyer of that home typically pays mortgage tax on the whole amount of the mortgage that they obtain. The mortgage tax in New York State is usually the largest amount a buyer pays in closing costs. This tax can easily account for 40% of the closing costs paid when purchasing a home. The mortgage tax rate in the 5 boroughs of New York City is generally between 1.8 to 2.55%! This accounts for thousands of dollars in closing costs that the buyer of a home can avoid.

The Advantage of CEMA to Buyers:
The buyer can avoid this tax in part, or in whole by obtaining an assignment of mortgage from the seller of the property. The savings is dependant upon the amount of the seller's existing lien. This assignment of mortgage must be approved by both the sellers mortgage holder and the buyers new mortgage company.

The Advantage of CEMA to Sellers:
The seller of the home also benefits from the assignment. In most cases the seller will avoid paying the New York State transfer tax they are obligated to pay when selling a home. The New York State transfer tax rate is $4 per $1,000 of selling price. If the seller chooses to assign the mortgage on their home, and the lenders allow this assignment, the seller can save thousands just for signing the authorization.