The New FHA
With the housing crisis in full swing, many changes have been made over the course of the last several months, including changes made by the Federal Housing Administration. With the enactment of the HOPE for Homeowners Act of 2008 on October 1st, 2008, many of the FHA maximum loan limits have changed. For Sonoma County, the FHA maximum loan limit has been revised to $662,500.
What do these changes mean to the average homeowner or buyer? What this means for both current homeowners and future home-buyers is a chance to either refinance out of your high interest rate adjustable mortgage, or for those that have been waiting, to purchase a home with less than a 700 credit score. As an added bonus, most of the time the FHA interest rate is lower than the standard conforming Fannie Mae or Freddie Mac rate.
For those who have been waiting to refinance out of their current
adjustable rate mortgage, the time is here. For example, if your current adjustable interest rate is 7.5% with a $500,000 loan amount, your current P & I is $3496.07. However, if you refinanced into an FHA 30 year fixed at the current rate of 5.625% your monthly P & I would be $2878.28. That would be a savings of $617.79 a month or $7413.48 a year. Let’s say your interest rate is 6.625%. Your current P & I monthly payment would be $3201.85. If you refinanced into an FHA 30 year fixed at the current rate of 5.625% your savings per month would be $323.07 or $3876.84 a year!
For those looking to purchase a new home, you will benefit also. FHA is much more forgiving when it comes to less than perfect credit. Unlike Fannie Mae and Freddie Mac, an FHA underwriter will take into account any extenuating circumstances that may have lowered your credit score. Do not assume that because your credit score is less than 680 you will not be approved. I have closed 100’s of FHA loans and have seen many approved with a manual underwrite with credit scores of 600. Now, do all of these types of loan approve? No, but the key to getting approved is having someone with many years of experience with FHA loans handle your submission.
Below are just some of the reasons to apply for an FHA loan.
- Competitive Interest Rates: FHA loans have always been competitive with conforming loan pricing. The majority of the time they are even lower than conforming loan rates. Call today for a quote, you may surprised at what the current rate is.
- Lower Down Payment: Currently FHA requires only a 3.5% down payment on purchases which can come from several sources. If you are having trouble with the down-payment or closing costs, you can get 100% of the down payment and closing costs gifted to you by a family member.
- Chapter 13 Bankruptcy: After 1 year of being in Chapter 13 you can apply for a home or refinance.
- Declining Markets: Unlike conventional loans, declining markets do not affect FHA mortgages.
- Closing Costs: A seller can help you by paying up to 6% of your closing costs.
- Qualifying for an FHA Loan: It is much easier to qualify for an FHA loan than most people think. Because the federal government is backing the FHA loan, those with less than perfect credit or have extenuating circumstances may still get approved. Do not assume your situation will cause you to be turned down for approval. Call today to see if you can qualify.
Remember, due to the high median home prices over the last several years, many loan officers in California have never originated an FHA loan. I have already received phone calls from curious borrowers who have spoken to these inexperienced loan officers and have been given wrong information. Yes, even by some of the mortgage lending giants. Be careful when choosing.
For more information or to see if you would qualify for an FHA loan, please call today at 707-494-8532 or toll free 877-392-0674, or email us by clicking Scott Dovala Branch Manager.