Could You Own a Home? For Many Home Buyers FHA is the Way!

I might venture a guess that better than half of all home buyers, and a great majority of first-time buyers, choose an FHA mortgage. Home loans come in a variety of flavors but the FHA loan, insured by the Federal Housing Administration, offers benefits not found in most other options, not the least of which are low down payment and more flexible credit standards.

In Arizona, there is even an FHA loan that is part of a fantastic down payment assistance program, overseen by the county in which the property is located. ‘Home in 5’ has been around for a while now and has been working extremely well for home buyers needing a little help with a down payment. With few restrictions and very fair regulation, the Home in 5 downpayment assistance program is something every first-time buyer should look into.

This program is not limited to first-time home buyers however. Any qualified home buyer at any stage of life may apply. Nor is it restricted to FHA mortgages. Home in 5 can also be used with the VA loan, and Veterans receive an additional 1% assistance.

Closing costs too, are allowed by FHA to be gifted or contributed to by a relative, the home seller, and other documented sources.

— What are Closing Costs and Who Pays for What? —

Give me a call if you have questions about Home in 5 Down Payment Assistance, FHA loans or VA financing. I’m always happy to help. 602-999-0952

The ABCs of FHA Loans

By Barbara Pronin

FHA loans, which have been helping people become homeowners since 1934, are a great option for homebuyers who may not have the savings for a down payment or have less than perfect credit. Because the Federal Housing Administration (FHA) – which is part of the Housing and Urban Development program (HUD) – insures the loan, the mortgage lender can offer qualified homebuyers a better deal.

There are different types of FHA loan programs, but they all come with caveats. According to HUD.gov, the current maximum loan limit in California ranges from $294,515 to $679,650 for a single-family home, which varies by county. Rates are typically fixed, with either 15- or 30-year terms – and buyers are required to pay mortgage insurance (MIP or PMI), either upfront or over the life of the loan, which represents about one percent of the cost of the loan.

To qualify for an FHA loan, the borrower must have a credit score of at least 580, and meet debt ratio guidelines. The maximum front-end ratio can be as high as 31% of the gross monthly income (includes principal, interest, real estate taxes, homeowner’s insurance and mortgage insurance), and the back-end ratio as high as 43% (includes any other monthly obligations that are reported on the borrower’s credit report).

These are FHA guidelines though – borrowers may find some lenders have lower debt ratio requirements. Lenders have full discretion on the debt ratio they will allow. Borrowers should try at least three lenders to compare rates and fees and find the loan that is best for their situation.

FHA loans offer certain advantages:

Low down payments – as little as 3.5 percent with a credit score of 580 or more, and the money may be gifted by a family member, employer or charitable organization but cannot be a loan
Low closing costs – vary from region to region
Easy credit qualifying – for buyers who meet credit score requirements and have a steady employment history

Last but not least, the ABCs of FHA loans include some lesser-known bonuses:

The FHA allows home sellers, builders and lenders to pay some of the borrower’s closing costs, such as funds for appraisal, credit report or title expenses. For example, a builder might offer to pay closing costs as an incentive for the borrower to buy a new home.
The FHA has a special loan for borrowers who want extra cash to make repairs to a fixer-upper home. The advantage of this 203(k) loan is that the loan amount is not based on the current appraised value of the home, but on the projected value after the repairs are completed.
Under certain circumstances, loan servicers can offer some relief to FHA borrowers who have suffered a serious financial hardship or are struggling to make their payments.

Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade. This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice. You are encouraged to consult your legal, tax or investment professional for specific advice. The material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. Reprinted with permission from RISMedia. ©2018. All rights reserved.

For more information, Call or Text: 602-999-0952
eMail: golfarizona@cox.net
Bill Salvatore / Arizona Elite Properties
Residential Sales, Marketing, and Property Management

Founder: AZVHV ⋅ MEMBER: Heroes Home Advantage
Voted East Valley Tribune’s: Best Gilbert Realtor

There are still down payment assistance programs available in Maricopa and Pinal Counties.
Call us for details: 602-999-0952

We also have options to help with your closing costs. See the links below or feel free to call or email for additional information: 602-999-0952 / golfarizona@cox.net