FHA Lending Center

fha loan or conventional loanThe FHA loan program is not just for first time home buyers. It is also for move up buyers or just any home buyer with only 3.5% for a down payment.  Traditionally thought of as a first time buyer loan program, there are plenty of Orange County homes buyers whose best, or only, loan option is FHA.

What is Unique about FHA?

  • 3.5% down payment to a loan amount of $625,500. There are Conventional loan programs that only require 5% down up to a loan amount of $417,000, but only FHA goes allows 3.5% down all the way to a loan amount of $625,500. This means an Orange Countean (my word) can buy a home $648,000 with only 3.5% down payment, or in this case $22,680.  Conventional financing requires 10% down, or $64,800 in this case. And this is a big reason why move up buyers will choose the FHA loan program.
  • The down payment can be a gift. Traditionally this was very unique, however now Freddie Mac will allow gift for the down payment, even when it’s only 5%. However, not all lenders follow that guideline, making FHA a great alternative.
  • FHA allows for higher debt to income ratios than Conventional financing. When a buyer is only putting 5% down on a Conventional loan, the highest front or back end debt to income ratio allowed is 45%. With FHA, it’s common to get loan approval with a “front end” debt to income ratio of 46.99% and a “back end” debt to income ratio of 56.99%. For someone who is pushing their qualification to the max, FHA may be the best loan option.
  • FHA only requires a two year wait period after a bankruptcy. Conventional financing requires a 4 year wait period after bankruptcy. For someone looking to buy a home, waiting two additional years to buy a home can be a long time. With FHA, all it takes is a little re-established credit and its possible to buy a home.
  • FHA only requires a 3 year wait after a foreclosure, short sale, or Deed in Lieu. Conventional guidelines require a 7 year wait after a foreclosure. For a short sale or Deed in Lieu, when the loan to value is higher than 90% the wait period is also 7 years. That is a much longer wait than what some has to deal with if getting an FHA loan.