Since the temporary increase in FHA limitsin March, and now with the permanent increase to $625,500 for Orange County, CA FHA loans, FHA has become a very popular loan program for home buyers. FHA was always a good program, but the limits were always too low. Now that the loan limits are equal to the Conforming loan limit, it is a good time to take a closer look at FHA.
FHA is not just for First Time Buyers
I've found that some of my clients thought FHA was only for First Time Buyers. But that is not the case. Anyone can buy a home with an FHA loan, but there are a few reasons why a home buyer would choose FHA over a Conventional program. (FHA is for Owner Occupied Primary residences only)
- FHA requires only 3% down. Effective January 1 2009 this will change to 3.5% down, but that is still much better than the 10% down a Conventional loan requires in California.
- FHA is more flexible with FICO credit scoring. Conventional loan financing currently has more "hits" to the fees and rate as the FICO scores drops below 720. FHA doesn't hit the fee or rate until the FICO drops below 620. (At least that's the way we do it at Home Point Financial.)
- FHA is more flexible with Down Payment Gifts. The entire down payment can be a gift. On a Conventional loan at least 5% of the down payment must come from the borrowers own funds, unless the gift is big enough to cover a full 20% down payment.
- FHA allows the seller to pay "prepaid expenses" for the buyer. Conventional loans do not allow this. This can save a buyer several thousand dollars.
To see a few more reasons why FHA may be a better choice for an Orange County, CA home buyer, click here. If you'd like to find out if an FHA loan is right for you, please contact Tim Storm at 949-829-1846.