FHA is more than “3.5% down.” Learn the cash-to-close, mortgage-insurance, seller-contribution, occupancy, DTI/AUS and documentation logic behind the program.
BACK TO PROGRAM MODULEGenerally at least 3.5% of the adjusted value for standard FHA forward purchase financing. This is not the same thing as total cash-to-close.
Interested-party contributions can generally be up to 6% of the sales price toward eligible closing costs, prepaid items and discount points; they cannot be used to satisfy the borrower’s minimum required investment.
UFMIP is generally 1.75% of the base loan amount and is commonly financed into the total loan amount.
Annual MIP is paid in monthly installments. For many >15-year loans with base loan amount at or below the applicable threshold and LTV >95%, the annual rate is 0.55%. Other LTV/term/loan-size combinations use different rates.
Monthly MIP is based on the applicable annual MIP rate and outstanding/base balance methodology. For training estimates, students should understand annual rate ÷ 12, but actual servicing calculations and current HUD rules govern.
Do not teach one universal FHA 'maximum DTI.' TOTAL Scorecard/AUS, manual underwriting, compensating factors and lender overlays can produce different allowable outcomes.
FHA forward purchase financing is generally for principal residences, subject to FHA rules.
FHA property standards, appraisal requirements and property eligibility matter in addition to borrower qualification.
After studying this program, the trainee should be able to explain the minimum-investment concept, seller-contribution limits, insurance/fee structure, occupancy, ratio philosophy, key eligibility questions, documentation triggers and why this program may or may not fit a borrower.