This is not to be confused with the home appraiser. It's important to understand the difference between appraisal and the inspection. The appraiser's job is to simply give their professional opinion of the homes value using the homes features, location of property and comparables (sales of the same kind). The appraiser will not look into the systems of the home. Some of the good inspectors will actually do your termite inspection for you at the same time, saving you time and money.

Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

FHA loans also have no prepayment penalty.

Qualifying guidlines assist the average buyer in each particular marketplace. Some underwriting guidelines are less restrictive than those of conventional fixed-rate loans, and can vary based on the marketplace.

The lender is insured against loss for the life of the FHA loan.

It is possible to place subsequent mortgages after an FHA first mortage.

The seller or other third party is allowed to pay part of, or all of the closing costs associated with the loan.

FHA loans are assumable, but the assuming party must qualify. Any FHA loan originated prior to December 1, 1986, are simply assumable. Meaning the purchaser does not need to formally qualify for the loan.

Loans are assumed at the note rate under which they were originally originated. The exception being on ARMs, in which case are assumed at the loan's current interest rate.

Now lookinng at the down side of the FHA loan. This type of loan can cost the seller more money in the form of non-allowables. Non-allowables are fees FHA will not allow the borrower to pay such as a processing fee etc... This may not be a deal killer by any means but it is something to take into consideration when writing the offer on the home you intend to purchase.

A FHA mortgage is when the government guarantees Federal Housing Authority loans. You can put down a smaller down payment on a FHA loan, but you will also be required to pay mortgage insurance.

What are the advantages to using FHA financing?

There is a low down payment requirement. The down payment is 3 percent, up to the maximum loan amount allowoable in your particular region.

The entire down payment can be gifted or borrowed from a relative (on most other loans the down payment must be sourced and seasoned).

Unlike conventional loans, there are no reserve requirements of two months' PITI payments at closing.

The interest rates are typically lower on FHA loans, than what they are on conventional fixed-rate loans.

Many people dream of owning a home but the home loan process can be confusing for many first time home buyers. Mortgage lenders offer first time buyers with many home loan options and assist the buyer in finding the best home loan for them. First time home buyer programs can offer lower interest rates, low down payments, or reduced taxes.

If you have not owned a home in 3 years you are considered a first time homebuyer and can be eligible for first time homebuyer programs.

Ask your mortgage broker about what first time home buyer programs that are available to you. You might even qualify for a down payment assistance program. There are several down payment assistance programs, that may be able to grant you the money for your down payment. The grant must be agreed upon by both the seller and buyer, and must be in the offer to purchase. The grant money does not need to be paid back, and could help you qualify for your first home!

There are some differences in Buyer's Assistance programs though. Some programs will actually put a lien on the property for a certain period of time. As long as you own the home for that time period the lien will be released and won't have to be paid back. You might want to ask about the program if you are looking at this option to determine if it will fit into your needs.

A FICO score is a number that rates a borrowers credit record. The score is based on a number of factors, including how well debts have been paid off, current levels of debt, types of credit, and length of credit history. Scores generally range from 350 to 900.

Credit scoring has been utilized by lenders for over 30 years. Credit scoring is a technology used by credit grantors to qualify the risk associated with extending credit to a given borrower. Risk is quantified by means of a score card which calculates a numeric value, or score, for a credit applicant a lender wants to evaluate. Score calculation is done based on information that has been determined to be indicative of future credit performance. There are many types of scoring methods currently utilized today including credit scoring, applicant scoring, behavioral scoring and several others. The type most relevant to the mortgage industry is credit scoring and among the most widely recognized is the FICO SCORE.

You should periodically review your FICO score and see if there is anything you can do to improve your score.

The are five main categories of information that the FICO score evaluates:

1. Credit Payment History: 35%
2. Credit Balances: 30%
3. Credit History: 15%
4. Credit Inquiries: 10%
5. Credit Types: 10%

Credit Payment History: 35%
At 35% Credit Payment History weighs the most. While events such as a bankruptcy, foreclosure or tax liens will have the greatest negative impact on your score, multiple and/or recent late payments have a tremendous impact as well.

The Fair, Isaac Corporation,(FICO) developed the formula for credit scoring. In general, the higher the score, the more creditworthy a borrower is in the eyes of the lender. A score of at least 680 indicates the borrower is very creditworthy.

Credit Balances: 30%
What is your credit balance to your credit limit? The Outstanding Credit Balance ratio has the second highest weight on your credit score. High balances on your credit cards can be viewed as a red flag since it’s an indication that you may be overextended. If you have multiple credit cards, you may want to spread the wealth to keep the credit balances to credit limit ratio low.

Credit Inquiries: 10%
Opening a new credit account doesn’t harm your credit score dramatically especially after you make the first payment. However, credit inquiries can negatively impact your score. Generating many credit inquiries exudes that you are trying to secure a large amount of credit or you are being turned down by lenders and have to apply elsewhere.

FICO score is one scoring system used by Experian, a credit profiling company. Two other companies have similar scoring systems that are just as widely accepted by lending banks. Together with Experian's FICO score, credit reports that contain TransUnion's Empirica score and Equifax's Beacon score are often referred to as the Tri-Merge Report.

To keep a healthy or high FICO score you will need to at the very least do these 3 things:

1 - Keep your balances on your credit cards to 50% of what your limit is
2 - Always pay your bils on time - if you have to hold a bill and pay late make sure it's not more than 30 days to post. 30 day lates really bring your credit scores down
3 - Try not to cancel cards you have had for a long time. Length of time on accounts plays a part into the scoring

For more information on how credit scores are developed, please visit:

Fair, Isaac and Company (FICO)
www.fairisaac.com

200 Smith Ranch Road
San Rafael, CA 94903
ph: (415) 472-2211

Credit History: 15%
Credit History is a reflection the length of time that you’ve had accounts open. You’re rewarded for keeping long term debt. Older credit accounts that have been used more frequently will have more weight than those that are newly opened or used with less frequency.

Credit Types: 10%
This percentage of your FICO score is based on your mix of credit. Do you have a good mix of credit cards, retail accounts, installment loans, finance company accounts or mortgage loans? It looks at the whole picture and totals how much of each type of account that you have.

A document that gives an estimate of a propertys fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

You probably have an opinion of the value of your home. Your opinion and a professional appraiser's opinion may be the same. But appraisers are required to be objective and impartial in their analyses and opinions. A professional appraiser has been trained in appraisal methodology and looks at how your home compares with sales and listings of homes similar to yours, considers many factors such as price trends and proximity to a freeway, complies with professional standards, and usually completes a written report.

A fee is paid to an appraiser, who is qualified by education, training, and experience to estimate the value of real and personal property. Appraisers usually charge one fee for a single-family home and slightly higher fees for a two-family, three-family, or four-family home.

Eventhough the borrower pays for the cost of the appraisal report, it is in the name of the lender bank or mortgage broker. By law, borrowers have the right to receive a copy of the Appraisal Report. In fact, lending institutions are required to disclose to the borrowers that they have this right.

There are several kinds of appraisals including an Automated Valuation Model, a Full Interior and Exterior Appraisal, and a Limited Exterior Appraisal. Some loans such as home equity loans under $100,000 don't require a full appraisal, while home loans over $2 million will require two full appraisals.

Costs for appraisals can vary depending on which company is used. Sometimes the cost can be inclusive in the loan fees and other times it will need to be paid when the appraiser comes out to the home. In any event, the appraisal evaluation is one of the key components in what loan amount each individual borrower will qualify for.

The appraisal in not to be confused with the home inspection. While an appraisal is completed for the value of the home alone, the inspection is performed to uncover potential problems that may be present in the home. It's very important to have both done on the property.