First Time Homebuyer’s FHA Loan

 You may have been hearing the buzz lately about FHA Loans. More and more homebuyers in the US are taking advantage of FHA Loans to purchase a home. According to The Mortgage Bankers Assn. press release July 9th, the FHA and VA loans represented 35.9% of new mortgage applications in June 2009, the highest level since November 1990, the lowest recorded share was 5.8 percent in August 2005.

The Federal Housing Administration (FHA), which administers the FHA Loan program, was created in 1934 as part of the National Housing Act during the great depression. The FHA is responsible for stabilizing the mortgage market by providing mortgage insurance backed by the federal government for mortgages originated by FHA Approved lenders.

There are several loan programs that the FHA offers; today I want to highlight the most popular FHA home loan –the 203(b). This fixed-rate loan often works well for first time home buyers because it allows individuals to finance up to 97% of their home loan which helps to keep down payments and closing costs at a minimum. The 203(b) home loan is also the only loan in which 100 percent of the closing costs can be a gift from a relative, non-profit, or government agency. The program is forgiving if you have not so great credit. A borrower with an FHA loan always pays the same mortgage insurance rate regardless of their credit score.

Recent economic stimulus legislation has increased the maximum FHA Loan Limits in Los Angeles dramatically; couple that with the increasing affordability of homes in Los Angeles, and that means that many more homes today qualify for the FHA loan Program.

LOS ANGELES County FHA Loan Limits

$729,750 Single Family

$934,200 Duplex

$1,129,250 Triplex

$1,403,400 Fourplex

Live somewhere else? Check your FHA Loan limit here, by zip or city https://entp.hud.gov/idapp/html/hicostlook.cfm

The FHA requires verification of your income and assets with tax returns and pay stubs and a full home appraisal performed by a FHA-certified appraiser to make a loan. If you have had an FHA loan in the last three years you will have to wait to  until 3 years after the loan date to qualify for a new FHA loan. Visit this link for a helpful checklist of information you will need to gather to apply: http://www.fha.com/loan_checklist.cfm

 To see if you qualify for a FHA loan, call me at 310-388-7332 or email at jamescampbell@coldwellbanker.com and I will put you in touch with my lender, he is great!

People who are borrowing less than 80% of their home’s value can get a better rate outside of the FHA program. That’s because rates are about one-eighth of a percentage point higher on FHA loans than non-FHA loans. Plus, FHA borrowers must pay mortgage insurance of a half percent each year and an upfront fee 1.5% of the loan amount upon origination. The half a percent a year mortgage insurance fee is about half the price of mortgage insurance on a conventional loan. After five years or when the loan balance reaches 78 percent, the mortgage insurance drops off the monthly payment.

For first time buyers, closing costs are another issue that can be a financial drain; typical closing costs for FHA home loans are around 2% or 3% of the total mortgage. One advantage when taking out an FHA loan? FHA mortgage terms may allow you to build your closing costs into your mortgage. FHA mortgage loans should take up no more than 29% of your monthly income, call me at 310-388-7332 or email me at jamescampbell@coldwellbanker.com and my lender can calculate your percentage of monthly income.

Additional Resources:

 http://www.fha.com/

 http://articles.latimes.com/2008/mar/23/business/fi-perfin23

 http://en.wikipedia.org/wiki/FHA_loan

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