FHA loans - easier down payment requirements but tougher appraisal standards
More home buyers are obtaining FHA loans due to easier down payment requirements. However, FHA appraisers can be tougher than Conventional (loan) appraisers.
Where FHA & Conventional appraisal practices differ:
FHA is concerned with lead based paint in homes constructed prior to 1978; peeling paint is a sore point with the appraiser and must be corrected prior to closing (it can simply be sanded down and repainted). The appraiser is “supposed” to check all appliances and test at least one electrical outlet per room. The electrical needs to pass the appraiser's check.
I was just reading your blog (Los Angeles Real Estate Blog) and was really impressed by your layout and content. I came across your site while researching FHA loan information It's nice to see someone looking out for those who are in less than perfect situations. I figured some of your readers may be interested in this FHA loan calculator (http://www.fhamortgagecenter.com/loan-limit-calculator.html). It gives lending limits not only in California, but for the entire country. There is also a lending glossary and guide on the site that your readers my benefit from.
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So interesting that we're returning to government mortgage programs. I wish that the FHA mortgage low limit had been competitive with conventional and jumbo loan limits before we got to this point. When loan officers are actually trained to originate loans, and not just sell loan products, the FHA, VA and Rural development guidelines are not an issue.
Yes, there is more paper work. Yes, the borrower needs to be able to write compelling letters of explanation.
The beauty of these loans is that they can be combined with additional loans for rehab and remodeling. So, not only can lead based paint issues be taken care of, but the value of the property may be increased through renovation and of course, the homeowner has safe decent, and hopefully green shelter.
Safe, affordable housing is possible for almost all families. It just takes a little effort on the part of everyone involved.
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Hi Phylis great information on FHA. You are absolutely correct FHA is the only game in town right now for home buyers looking to purchase a new home with less than perfect credit. In addition to low down payment options FHA home loans have easier credit qualifying guidelines such as:
No minimum FICO score or credit score requirements.
FHA will allow a home purchase two years after a Bankruptcy.
FHA will allow a home purchase three years after a Foreclosure.
FHA also has easier debt ratio & job requirements such as
Higher Debt Ratio's than other home loan programs.
Less than two years on the job is allowed.
Self-Employed individuals ok.
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Just started the fha loan process and the mortgage broker tells me the down payment is 3.5% but I see here listed at 3%. I read that in January it goes up to 3.5%. Can you figure out what the difference is?
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yes that’s correct the new down payment requirement for FHA loans has gone up to 3.5%. The Federal Housing Administration is in charge of making sure the program is self sufficient and not relying on tax payers to cover the difference. Therefore, with all the foreclosures the FHA premiums have gone up. The new guidelines require a 3.5% down payment and now an upfront mortgage insurance premium of 1.75%. Also the (MIP) mortgage insurance premium for FHA loans is now .55%. The premium and down payment is to curb the Foreclosures and make sure there are sufficient funds to cover the FHA loan defaults.
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This website is invaluable. You are providing a great service - Phyllis, thank you for your efforts.
In regards to the 12/24/08 post, I am wondering how to determine what the income/debt ratios are for FHA loans and if they have also changed. I have heard of an instance where a buyer in Sacto was required to put down $55k for an FHA loan - I believe the home purchase price was $450k. I'm concerned about getting approved as I have a very high student loan debt load on my credit report (I attended graduate school at USC - need I say more). I do have a very high credit score, which is a plus. Also, is there a way to guesstimate how long an FHA approval will take - I imagine its advisable to get pre-approved to determine just how much I can qualify for under FHA.
Any information would be greatly appreciated. Thank you again.
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RE: your student loans, I believe that the lender will qualify you based on the minimum payment but I think it is best to always consult a loan professional when prequalifying. The lender's guidelines seem like they are changing on a weekly basis.
Don't work with just any lender when going FHA or it can be a nightmare; work with a lender who is (FHA) experienced and you should be able to close escrow (FHA) in approximately 30 days. You might try contacting one of the lenders on my referral list for a prequalification and further information regarding qualifying.
Best of luck to you & Happy New Year
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I was just thinking about FHA loans and you've really helped out. Thanks!
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