The FHA Section 245 loan program is available to first-time or repeat homebuyers. Applicants must meet all FHA eligibility requirements. With the umbrella of the FHA insured Section 245 mortgage, lenders can grant loans to individuals or families who may not otherwise qualify for conventional loans or other FHA insured loans.
Also, with a FHA insured loan, down payments can be as low as 3 percent, allowing borrowers to finance the remaining 97 percent of the cost of the home through their mortgage. FHA approved down payment grants are available as well. Additionally, some or all of the closing costs may be financed into the mortgage, further reducing the up-front costs.
The graduated loan program is open to any family or individual who expects their annual income to rise substantially over the next five to ten years. However, borrowers must occupy the purchased home as their primary residence. The Section 245 program is not available to investors. Applications for the Section 245 graduated loan program must be made through FHA approved lending institutions.
The types of properties that are included under the Section 245 graduated mortgage plan include single-family homes, multi-family homes, manufactured homes, and some health related facilities.
Many individuals and families do not qualify for typical conventional fixed-rate mortgages, especially young and low to moderate-income families. In order to reduce the risk to a lender, FHA has developed creative methods that allow a lender to confidently approve home loans to those lesser-qualified individuals. The Section 245 graduated loan program is one of those methods that can allow a family with continually increasing incomes to live in their own home sooner than they thought possible.