FHA Loans California
What are FHA loans?
Federal Housing Administration (FHA) mortgages are a special type of mortgage that is insured by the government, and comes with a variety of advantages. FHA mortgages are only granted to qualified buyers, and allow for more flexible credit requirements in applications. There is also less equity required of applicants for FHA mortgages. Furthermore, FHA mortgages come with the advantage of requiring a very low down payment, sometimes even as low as 3.5% of the purchase price. If an FHA mortgage is something you’re interested in, don’t hesitate to contact us so that we can help you determine if an FHA mortgage is the best option for you.
FHA loans are a competitive loan for today’s mortgage borrowers, the option for a loan down payment (3.5%) and more relaxed lending standards allow borrowers to get a loan that they might not have received previously. FHA loans are insured by the government under the Federal Housing Administration, which is the agency within the U.S. Department of HUD. HUD receives the mortgage insurance premiums from the FHA loans and they protect the lender from a loss if the borrower defaults on a loan.
Why people get FHA loans
- Loan Down payments
- Lower Credit scores
- Less stringent and more flexible underwriting guidelines
The lowest down payment on an FHA loan is 3.5% and you need a minimum of a 580 credit score. Conventional loans with 3% down have much higher credit standards and lower loan balances. A limited down payment for a loan amount up to $636,150 is a great opportunity for a borrower to get into a home.
Some underwriting guidelines that show the flexibility included the following:
- Down payment. The down payment can come from the borrowers own funds OR can come in the form of a gift from a family member, grant from a state or local government assistance program.
- Closing Costs – FHA allows sellers, builder and lenders to pay for some of the borrowers closing costs. These rates are typically a little higher so the lender can pay for the closing costs. Make sure you look at both options (lender paid or borrower paid closing costs)
- Annual premiums for FHA loans
- 15-year loan, down payment (or equity) of less than 10 percent: 0.7 percent
- 15-year loan, down payment (or equity of 10 percent or more): 0.45 percent
- 30-year loan, down payment (or equity) of less than 5 percent: 1.35 percent (Currently reduced to .85 percent)
- 30-year loan, down payment (or equity) of 5 percent or more: 1.3 percent (Currently reduced to .80 percent)