FHA Discounts for First-Time Homebuyers

FHA Discounts for First-Time Homebuyers

Let us start with the basics - What is FHA?

The Federal Housing Administration, "FHA", provides mortgage insurance on loans that are funded by FHA-approved lenders throughout the United States and its territories. FHA, the world's largest mortgage insurer, provides mortgage insurance on single family homes, multifamily homes to include manufactured homes and other types of properties. Created in 1934 by Congress due to severe economic strife with a goal to bolster the economy and facilitate home ownership, this governmental agency became part of the HUD or Department of Housing and Urban Development in 1965. Since its inception, the FHA and HUD has insured over 34 million home mortgages.

So, what exactly is mortgage insurance?

FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. In the event of a homeowner's default on the loan, FHA will pay a claim to the loan servicer. Loans must meet certain requirements established by FHA to qualify for FHA mortgage insurance.

How does it work?

This applies to all loan terms greater than 15 years, and less than or equal to 15 years.

When the LTV or Loan-To-Value is greater than 90%, the annual MIP or Mortgage Insurance Premium will be collected until the end of the term of the loan which is typically 30 years, or whichever comes first.

When the LTV or Loan-To-Value is less than or equal to 90%, the annual MIP or Mortgage Insurance Premium will be collected until the end of the term of the loan which is typically 30 years, or 11 years, whichever comes first.

You must pay 1.75% for any amount of the loan at all Loan-To-Value's.


The FHA is the only Governmental agency that operates entirely from self-generated income and not from tax-payer funding. The income generated from Mortgage Insurance Premiums paid by homeowners is used to operate the program in its entirety. This program generates enormous economic stimulus for our nation from tax bases, economic development, job growth, increased revenues for schools, economic sustainability and many other forms of revenue.

First-Time Homebuyers can take advantage of an FHA discount with the purchase of their first home. This incentive is designed to motivate renters towards the path of home ownership and to improve mortgage performance. This new initiative provides greater information to the First-Time Homebuyer through classroom education and in turn rewards them with a reduction in the FHA mortgage insurance premium. Statistics have shown a significant correlation between homeowners receiving housing education and counseling and decreased mortgage delinquency with improved mortgage performance.

This new FHA initiative is called Homeowners Armed with Knowledge (HAWK).

In the Fall of 2014, FHA rolls out its initial phase of HAWK. First-Time Homebuyers are required to complete a series of educational courses prior to and post the purchase of their first home. The First-Time Homebuyer completes a course prior to signing and completed a purchase contract. This course will help you to become familiar with the intricacies of a real estate contract and important topics necessary to know before choosing a property, entering a contract on a property and choosing the right loan type. This course is 6-hours in length.

The second course should be completed after you sign and ratify the contract for the property but before you finalize your loan requirements. This course ensures that you understand the processes involved while in escrow, and all the formalities of a loan process. This course is 1-hour in length.

The third class is completed within 12 months following the finalizing of the loan. This course is 1-hour in length. After completion of each class, the First-Time Homebuyer will receive a certificate indicating that the course has been successfully completed. These certificates must be submitted in order to qualify and receive the reduction in FHA mortgage insurance premium.

As a REALTOR®, I pride myself on educating and counseling my homebuyers so that they have a better understanding of the overall processes involved during the search phase, contract writing phase, escrow and loan process phase, and even beyond the sale. The H.A.W.K. initiative helps me to help my First-time Homebuyers become proficient in the homebuying process and in meeting their real estate goals. 

It is vital as a REALTOR® that we all ensure our clients are familiar with this new FHA initiative as it delivers to First-Time Homebuyers, upon completion of the program's pre-closing housing counseling requirements, which is the first 2 classes, a 50 basis point reduction in their upfront FHA mortgage insurance premium (MIP) as well as a 10 basis point reduction in their annual FHA mortgage insurance premium (MIP). Choosing to participate and complete the post-closing housing counseling, or the 3rd and final class, and remaining current on your monthly mortgage payments for the first 24 consecutive months, with no serious delinquencies, participants receive an additional 15 basis point reduction in their annual FHA mortgage insurance premium (MIP).  

This new FHA initiative has limitations. This is currently a 4-Year Pilot Program. There are specific requirements and not all FHA loans will qualify under this program. In addition, FHA has determined that there will be a maximum number of FHA loans processed using the H.A.W.K. program each year. So, it would be in the best interest of the First-Time Homebuyer to utilize this program, if able to do so, in the beginning of the year as opposed to waiting until the end of the year.

Please see your local Lender for further details, or you may contact Rebecca Keeney,
REALTOR®, if you do not have a Lender and she would be delighted to introduce you to a number of experienced and qualified FHA Lenders in your community.

This is a fantastic program! FHA continues to improve the housing market and overall economy with its new H.A.W.K. initiative. By virtue of this exciting new initiative, they are increasing First-Time Homebuyer awareness through counseling and education, promoting Home ownership, decreasing mortgage delinquency rates and improving overall mortgage performance.

For more detailed information on this new FHA H.A.W.K. Initiative, please contact Rebecca Keeney, your Hampton Roads REALTOR®,  at Info@RebeccaKeeney.com or call direct at 757-737-3498.

 
© 2001 - 2015 Reliance Network and Berkshire Hathaway HomeServices Towne Realty. All rights reserved. US Reg. Copyright TX-5-910-991, TX-5-910-992, TX-5-910-993, and TX-5-910-994. © 2015 An independently owned and operated franchisee of BHH Affiliates, LLC. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc. ® Equal Housing Opportunity . Berkshire Hathaway HomeServices Towne Realty is an affiliate of Towne Bank.

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