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FHA

     FHA stands for the Federal Housing Administration.  In California, as of June of 2007, FHA loans accounted for less than 2% of all loans originated. However as of October of 2008, FHA loans have made a dramatic comback and are over 55% of all mortgage originations in California.

     Why? Because you only need to put down 3.5% to buy a home,   Throw in a CHDP second mortgage, and you may only have to put down 1% (this program has limitations) to buy a home in California. Click here to learn about the CalHFA CHDP second mortgage which can be combined with an FHA first mortgage.

     Fannie Mae and Freddie Mac loans now require at leaset 5% minimum downpayment when purchasing a home, and most conventional lenders require you to have 20-25% equity in your home before you can pull cash out. FHA has looser guidelines which will allow a homeowner to pull out more cash than a conventional loan.  Due to FHA's looser restrictions, FHA has become the better deal for consumers.

     FHA loans are strictly fully documented, (no stated income) and as stated above, you will be required to pay PMI, or MIP not matter how much equity you have in the home.  MIP, mortgage insurance premium, which is paid monthly,  that you pay that protects the lender in the case of your loan going into default. You will have to pay a portion of the insurance upfront with your closing costs when purchasing or refinancing, and than pay it monthly along with your principle, interest and taxes and insurance all in the form of a monthly payment.

    FHA is looked at as the "new subprime loan", even though it has been around for decades.

    FHA programs allow credit scores as low as 620 (some lenders may require a 680 credit score), and will allow non-occupant co-borrowers to help qualify for the loan.  Fannie and Freddie minimum credit scores are 680 and will not allow non-occupant co-borrowers to help qualify. The rates are a bit higher on an FHA loan vs. Fannie Mae and Freddie Mac, but usually not more than .25%. 

    If you want to see if you qualify for an FHA home loan feel free to send me an e-mail or click here for to fill out a quick questionairre and I'll call you back within 24 hours.