Oxford, MS condo - kiamie real estate

Housing Opportunity Through Modernization Act could create new financing opportunities for Oxford, MS condo buyers.

FHA financing option for Oxford, MS condo buyers

As of yesterday (August 1, 2016), President Obama signed H.R. 3700 into law to reduce barriers in FHA financing for condos. During the Great Depression, the Federal Housing Administration (FHA) was formed to insure government-backed mortgages. In turn, this government-backed mortgage instrument provided a greater security for banks to offer more favorable loan terms for the lendee.

H.R. 3700 will continue to offer assistance to well-qualified home buyers who are facing slim condo inventories in Oxford, rising prices through the Oxford area, and strict underwriting by lowering the owner-occupancy from 50% to 35%. For investors, purchases of condos reduced the owner occupancy percentages. Consequently, banks are creating loan financing out of reach for many potential credit worthy property owners.

In’s and out’s of FHA loans

For FHA loans, credit score requirements are typically lower than conventional loans (500 vs. 620+). Furthermore, higher credit scores will allow for more favorable interest rates for the lendee. Moreover, down payments are contingent on credit scores as well.

  • 3.5% down payments for credit scores of >580
  • 10% down payments for credit scores of 500-579

Other features of FHA loans are fixed interest rates for 15-year or 30-year term periods. Additionally, borrowers can cover closing costs and finance home repairs.

Lastly, lenders require the borrowers of FHA loans to pay two mortgage insurance premiums: the upfront premium and the annual premium. The borrower will pay the mortgage insurance premiums to protect the lender if the borrower defaults on the loan.

  • The upfront premium is equal to 1.75% of the loan amount and is paid at the beginning of the loan. Of course, if the borrower chooses, the premium can be added to the total loan balance.
  • The annual premium is 0.45% of the loan amount and the initial loan-to-value ratio for 15 year loans. However, for 30 year loans, the annual premium is 1.05%. The borrower will pay the annual premium in twelve installments over the year.

Search for FHA loans to find the best mortgage for you.

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