Just like in 2009, 2010 will be a big year for the FHA loan program and Orange County First Time Buyers. There are several reasons for this, one of them being that there just aren't many competing loan programs.
4 Reasons FHA will Continue to be Preferred by Orange County First Time Buyers
- Only 3.5% down payment requirement. Other Conventional programs require at least 10% down, as long as the borrowers FICO scores are 740. There are a few niche programs, such as the Fannie Mae Homepath program which is for specific Fannie Mae owned properties, or the VA loan program which allows for 100% financing but is only for VA eligible borrowers.
- The FHA credit guidelines are more flexible than Conventional financing. Although technically FHA does not require a minimum FICO score, most lenders want the borrower to have at least a 620 FICO. Even if a Conventional buyer has 20% down down payment, they would most likely get a lower interest rate by choosing FHA rather than Fannie Mae/Freddie Mac.
- Down payment can be a gift with FHA. Not only is the minimum down payment only 3.5%, but the down payment can be a gift from a relative. It can also come from a 401K loan without needing the count loan payment in the debt to income ratios. With Conventional financing, if the down payment can be gift if there is 20% down. If the down payment will be less than 20%, than at least 5% of the purchase price must come from the buyer.
- FHA allows for higher debt to income ratios. the guideline total debt ratio for FHA is 43%, but for borrowers with just "decent" credit, it is not unusual to get an approval with a ratio as high as 55%. Fannie Mae recently lowered the debt to income ratio they will accept to 45%. With solid compensating factors, such as reserves and perfect credit, Fannie Mae may allow the ratio to be 50%, but again we are assuming 20% down, not the 3.5% the FHA is looking for.
First Time Buyer Tax Credit offers Incentive to Act Fast
With the extension of the $8,000 First Time Buyer Tax Credit, Orange County First Time Buyers have until April 30, 2010 to have a signed accepted contract to buy a home, and then until June 30, 2010 to close the transaction. With property values down to affordable levels not seen in many years, first time buyers are finding they can buy a home for a payment similar to their rent payment. This, combined with the $8,000 "gift" from the government, should result in a lot of Orange County first time buyer activity in the first quarter of 2010.
The First Step is FHA PreApproval
Actually, the first step should be to talk to an Orange County Direct Lender who is an FHA expert. Your lender should be able to prepare loan scenarios based on your qualification and goals which will give you a good idea of what it will take to buy a home. It is important to know how much of a payment you are comfortable with, along with how much money you will need to buy a home. The initial prequalification process can be quick, but the search for the perfect home can take some time. Orange County First Time Buyers who want to take advantage of the $8,000 First Time Buyer Tax Credit need to act quickly.
Contact us for your Orange County FHA Mortgage:
Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.
949-829-1846| tstorm (at) ochomebuyerloans.com