FHA Loan

The FHA Loan program is administered by The Federal Housing Administration (FHA).

FHA logo

The FHA was created in 1934 as part of the National Housing Act during the great depression to stabilize the housing market.

FHA Loans work great for first time home buyers because they require only a 3.5% down payment (coming up with the down payment is usually the hardest part of buying a home for the first time home buyer). FHA Loans are fixed-rate loans. FHA Loans allows 100% of the buyer side closing costs for a transaction to be a gift. Qualifying for an FHA loan is flexible, even if, as a buyer, you do not have great credit. A downside to buying with less than 20% down payment is that there will be mortgage insurance (also called M.I.) which is an additional monthly expense. FHA loans require the borrow to pay mortgage insurance.

The current maximum FHA Loan Limits in Los Angeles are:

$729,750 Single Family

$934,200 Duplex

$1,129,250 Triplex

$1,403,400 Fourplex

FHA Loans requires an FHA appraiser to inspect the property. FHA loans qualify two things- they qualifying you as the buyer and also the property. the FHA will not loan if the property is in substandard living condition- the appraiser will send a list of items that need to be fixed in order for the loan to go through- once the work has been completed another appraisal will be done and the loan can fund. If you have had an FHA loan in the last three years you will have to wait until 3 years after the loan date to qualify for a new FHA loan. Visit this link for a helpful checklist of information you will need to gather to apply:http://www.fha.com/loan_checklist.cfm

People who can put down 20% or more can get a better rate from a conventional loan instead of using the FHA program. That’s because rates are about one-eighth of a percentage point higher for FHA loans than conventional loans. Plus, FHA borrowers must pay mortgage insurance of a half percent each year and an upfront fee 1.5% of the loan amount upon origination. The half a percent a year mortgage insurance fee is about half the price of mortgage insurance on a conventional loan. After five years or when the loan balance reaches 78 percent, the mortgage insurance goes away automatically.

 

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