The FHA 15 year fixed program is a great program for Orange County home owners and home buyers. While the downside is the higher payment that comes with a shorter amortization, for those that can handle it, there are thousands of dollars to be saved.
Prior to 2007, many homeowners and people in the mortgage industry felt paying down a mortgage was not a smart thing to do. The mortgage interest deduction was considered too big an advantage to give up. But over the past few years, as many homeowners have experienced the downside of having a "big mortgage", many homeowners have chosen to go with a 15 year fixed. FHA actually offers a great 15 year fixed program. Below are a few of the reasons why the FHA 15 year fixed is so good.
FHA 15 Year Fixed Advantages for Orange County Home Owners
- The interest rate is lower, by .375 to .5% in rate, as compared to a 30 year fixed program.
- The Monthly Mortgage Insurance is less on the FHA 15 year fixed than on the FHA 30 year fixed. And at 90% loan to value or less, the MMI is completely waived.
- The FHA 15 year fixed is more flexible with underwriting and FICO scores than Conventional Fannie Mae and Freddie Mac programs.
- FHA allows the combining of a 1st and 2nd mortgage up to 97.75% loan to value, up to a $729,750 loan amount in Orange and Los Angeles counties. Most Conventional lenders will consider this a "cash out" refinance, and won't allow financing over 60 to 65% loan to value.
- FHA will even allow a "cash out" refinance to 85% loan to value for those who have credit card debt to consolidate.
Example of an FHA 15 Year Fixed in the Orange County City of Irvine
Recently, an Irvine home owner named Mike Jones was considering a refinance. His first mortgage was $440,000 at an interest rate of 5.5%. His payment was $2,611 and he had 27 years remaining on the loan. He also had a 2nd mortgage at a 30 year fixed rate of 6.5% in the amount of $85,000. His payment was $568 and he had 27 years remaining. He had called multiple lenders looking for a way to combine his loan, but due to the drop in his properties value from $700,000 to the current $610,000, it didn't seem possible. For a Conventional loan, lenders wanted his property to be valued at over $850,000. He did find one lender who would go as high as 80% loan to value, but the interest rate would not have been an improvement. Then, Mike contacted a local Orange County Direct FHA Lender located in Irvine, and learned about the FHA program. The downside was his combined mortgage payment would be $4,073, which was $894 higher than his current payment. But the interest rate would be 4.375% (4.534 APR) and there would be no Monthly Mortgage Insurance. Although his payment would be higher, the net effect would be savings over the life of the loan of approximately $300,000. That was hard to pass up. Mike closed the deal and went from the feeling of "my house will never be paid off" to a feeling of "now I can retire in 15 years".
Find an Orange County FHA Expert
Not all lenders know the in's and out's of FHA. Finding an FHA Expert who can prepare personalized loan scenarios based on an individuals situation is critical, before money is spent on an appraisal. Many of the best OC FHA loan officers are able to not only prepare scenarios, but present them in a manner that is easy to understand. Incorporating video into the presentation can help the borrower not only better understand his/her options, but also be able to quickly share the scenarios with his/her spouse or financial advisor. With interest rates remaining low, now is a great time to check into an FHA program.
Authored by Tim Storm, an Orange County, CA Loan Officer with 20 year experience– Please contact my office at Home Point Financial for more information about an Orange County, CA home loan. 949-829-1846. MLO# 223456
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949-829-1846 | tstorm (at) ochomebuyerloans.com