The FHA home loan has been the poster child for Wisconsin first time home buyers for several years, and with good reason.  The low down payment, the generous loan amounts, and the low private mortgage insurance rates have been a real boost to helping many people acquire their first home.  There are some other features of the Wisconsin FHA loan that some people may not fully understand.

As far as mortgage insurance goes, the general population feels it is just a protection for the lender.  For the most part, this is correct.  Whether we are discussing private mortgage insurance for a conventional loan or the FHA mortgage insurance, the monies are placed into a specific fund.  The fund is used to pay lenders if the borrowers fail to make the payments on the loan.

But FHA has a special clause.  For borrowers that suffer from a serious illness, become temporarily unemployed or has any event that momentarily prevents them from paying their mortgage obligation, FHA has a small relief.  FHA is not in the foreclosure business.  In order to help people in these types of situations FHA will allow borrowers to miss up to three consecutive payments while they get their income back to normal.  Those three payments are placed as a second mortgage on the loan.  The second mortgage will be paid when the home is sold or refinanced.  In order to get this approved a borrower will need to talk to one of the Housing Counselors from a HUD office.

Another benefit of the FHA loan is the modified appraisal requirements.  Up until a few years ago the FHA restrictions on appraisals were a burden to some sellers, especially in the case of older homes.  Many times a buyer would put an offer on a home only to find out that the seller had to make numerous repairs in order to get the home ready to pass the FHA appraisal process.  This has been radically revamped.  The basic intent of the newer requirements is to ensure that a home is safe and healthy for the new owners.

Taking advantage of the low FHA rates and the wonderful features that it offers is still a great move for many first time home buyers.

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