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FHA

FHA Loan Overview

The National Housing Act of 1934 created the Federal Housing Administration (FHA) to help first-time buyers and lower income Americans purchase a home.

Today, the US Department of Housing and Urban Development (HUD) insures FHA loans. The loan provides low down payment options to prospective buyers that would marginally qualify under industry standard loans and has proven popular with first-time home owners.

For more information, go to www.hud.gov.

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203(b) Fixed Rate Mortgage Loan Program

The most popular FHA loan program is the 203(b) fixed rate mortgage loan:

 Down payment as low as 3.5 percent.

Mortgage insurance paid primarily by borrowers making a down payment of less than 20 percent.

100 percent of the closing costs can be a gift from a relative, non-profit, or government agency.

Loan terms include fixed (15 or 30 years) or adjustable rate options.

Non-occupant co-borrower eligible.

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Eligibility

Personal financial requirements and qualifying property specifications:

Minimum credit score: 560.

Debt-to-income ratio (DTI): 50 percent. This is the reasonable top end, but circumstances can permit exceptions.

In San Luis Obispo County, maximum value of single-family home at median price: $687,500. For information on additional California counties, see www.hud.gov.

Purchase must be owner-occupied property.

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Special features

96.5 percent financing: down payment as low as 3.5 percent.

Eligible for non-occupant co-signer.

100 percent of closing cost can be paid by relative, non-profit, or government.

Seller can contribute up to 6 percent of closing costs.

More leniency towards derogatory credit items.

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FHA Streamline Refinance Option (to save you thousands)

Beginning June 11, 2012, FHA will lower its Upfront Mortgage Insurance Premium (UFMIP) to just .01 percent and reduce its annual premium to .55 percent for certain FHA borrowers. FHA hopes to help more borrowers stay in their homes, thereby decreasing the potential for future default and reducing losses to the Mutual Mortgage Insurance (MMI) Fund.

  • Qualifying borrowers must be current on their existing FHA-insured mortgages, which were endorsed on or before May 31, 2009.
  • By refinancing through this streamlined process, it’s estimated that the average qualified FHA-insured borrower will save approximately $3,000 a year or $250 per month.
  • FHA’s new discounted prices will allow many borrowers to refinance into a lower cost FHA-insured mortgage without requiring additional underwriting.