CharterWest has an experienced staff of professionals dedicated to helping people find affordable housing. We have included a brief description of the FHA program and its many benefits to homeowners.

An FHA loan is a home mortgage that allows for a purchase or refinance with a low down payment and is insured by the Federal Housing Administration. FHA’s mortgage insurance programs help low- and moderate-income families become homeowners by lowering the cost of financing.

Some of the benefits include:

Down payment requirements can be low. In contrast to conventional mortgage products, which frequently require down payments of 5 percent or more of the purchase price of the home, single-family mortgages insured by FHA under Section 203(b) make it possible to reduce down payments to as little as 3 percent. This is because FHA insurance allows borrowers to finance approximately 97 percent of the value of their home purchase through their mortgage in some cases.

Many closing costs can be financed. With most conventional loans, the borrower must pay, at the time of purchase, closing costs (the many fees and charges associated with buying a home) equivalent to 2–3 percent of the price of the home. The FHA program allows the borrower to finance many of these charges, thus reducing the up-front cost of buying a home. FHA mortgage insurance is not free: borrowers pay an up-front insurance premium (which may be financed) at the time of purchase as well as monthly premiums that are not financed but instead are added to the regular mortgage payment.

Borrowers can make the down payment with a gift. The down payment can be 100 percent gift funds from a family member or an organization. This is one of the key benefits to the FHA program.

Verification of the source of gift money is required. It is necessary that the gift funds be deposited in the borrower’s bank or savings account, or in an escrow account, prior to underwriting approval. Proof of deposit is required.

Gift donors are restricted primarily to a relative of the borrower. They can also be certain organizations, such as a labor union or a nonprofit organization.

FHA Streamline Refinances

FHA has permitted streamline refinances on insured mortgages since the early 1980s. “Streamline” refers only to the amount of documentation and underwriting that needs to be performed by the mortgage company and does not mean that there are no costs involved in the transaction.

The basic requirements of a streamline refinance are:

The mortgage to be refinanced must already be FHA-insured.
The mortgage to be refinanced should be current (not delinquent).
The refinance is to result in a lowering of the borrower’s monthly principal and interest payments.
No cash may be taken out on mortgages refinanced using the streamline refinance process.

CharterWest offers streamline refinances in several ways. We offer “no cost” refinances (no out-of-pocket expenses to the borrower) by charging a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash. From this premium, we pay any closing costs that are incurred on the transaction.

CharterWest also offers streamline refinances that include the closing costs into the new mortgage amount. This can be done only if there is sufficient equity in the property, as determined by an appraisal. Streamline refinances can also be done without appraisals, but the new loan amount cannot exceed what is currently owed, i.e., closing costs may not be added to the new mortgage with those costs paid either in cash or through the premium rate as described above. Investment properties (properties in which the borrower does not reside in as his or her principal residence) may only be refinanced without an appraisal and, thus, closing costs may not be included in the new mortgage amount. Call us for more details at 888-273-9500.