9.21.2011

FHA: F'in Hit that Ass

Not hard, but seriously, it won't move and I've got places to be.

Also, I enjoy wacky acronyms.

Recently I've discovered that, besides being set adrift in the middle of the ocean, finding a home loan to fit your needs really drives home where your place is in the world.

Pictured: The majority's place in the world.
Also, those aren't rocks...
If you're like most Americans, you're one paycheck and a car breakdown away from financial ruin.
i.e "normal".
Take a minute to bask in the comforting warmth of monetary mediocrity...
Feels kind of like cheap beer and stale pee doesn't it?
No?
Ah, nevermind then..
By the way, ever notice how all beer is "premium"?
Anyway, after my recent mucking about in the realm of mortgage lending I've discovered two things:
I'm poor, and I've got a sexy, sexy credit score.

Also rhyming skills... Sweet.

As a member of the working poor, I've fallen into a certain profile type. The kind of profile that the Federal Housing Administration is all about.

Yeah, baby..
If you're not a server, stripper, or drug dealer on the side, your liquidity isn't exactly liquid. That is, the penny rolling begins in earnest on the second Wednesday after payday.

Only a few more and I can afford to do laundry
Fortunately for most of us though, as long as certain broad criteria is met, the government will help set you up with a home loan.

Now it's not charity, nor is it "free" money. An FHA mortgage is basically the government vouching for you, (the home buyer), to the bank.

Gov: "Listen, we told the bank that you're cool.
But fuck this up and we will fucking sodomize you, your credit rating and your way of life.
Capeche?"

As long as some basic standards are met, the government will go to the bank and be all like:
"Ai, dis guy is all right. Whydunya help im out a little? Remember we's bailed ya out not too long ago. Yousguys kinda owes us."

That's how I imagine it happens anyway..

Of course the bank says "okay" but they make a condition of their own. They're not going to be left holding the bag if this schmuck home buyer decides to welch on the deal. So the bank agrees to supply the loan, as long as the government guarantees the bank will get their money back if the home buyer can't or won't make the payment. The government puts his arm around you, the home buyer, and says: "Sure, no problem. The kid's alright. I'll insure the money for up to 80% of the down payment."

Then you develop a cocaine habit, can't pay, and the government sends out the crazy, early 90's Joe Pesci to collect what's owed...
And for the love of God, don't laugh or tell him he's funny.

My imagination is occasionally a screwed up place...

In a nutshell though, that's what a FHA loan is. It's a loan insured by the government, which, depending on your credit rating, allows you to get away with paying as little as 3% down.

And despite my many gangster references, an FHA loan is the squeakiest of the squeaky clean when it comes to lending practices. Remember those "points" and charges from earlier? The FHA makes sure to limit the number of fees a lender can charge for a home purchase.

I guess you could call it an "anti-bullshit measure"

It's not all sunshine and lemon drops though. There is a limit to the amount of money you can get with an FHA loan. They'll take into account the location, cost of living, etc. But to make sure the program serves low to moderate income people, let's just say you won't be getting any $350,000 home loans in Port Huron, Michigan.
No.
 And remember that extra bit of insurance that guarantees the loan at a lower rate? The home buyer pays it. Generally it'll be bundled in neatly with the rest of the loan as part of the P.I.T.I (Principle, Interest, Taxes, and Insurance) and it's possible that you'll still be paying private insurance anyway.
This makes perfect sense if you've been paying attention.
 But in the end, if you don't have a lot of ready money, but have decent credit, plan on living in the house for a long time and aren't looking to purchase a chateau, then a FHA home loan is one of the best options out there.

Don't just take whatever loan you're handed first though. Make sure to shop around. FHA has to go through lenders, and all loan programs aren't created equal. I've gotten estimates from three different lenders and the interest rate fluctuates from 4.5% to 3.875%, back up to 4.25% and all the way down to 3.75%.

And keep tabs on that APR!

Seriously though, why didn't we have a class about this stuff in high school? A little less Greek mythology, a little more percentages.
Greek mythology = Orgies, bestiality, some guy discovering how to make fire.
Got it.
 Because, lets be honest, one is a lot more helpful than the other.


1 comment:

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