FHA will be the loan of choice for most Placentia home buyers in 2010. In 2009, over 30% of all loans were FHA. The rest were a combination of cash buyers, Orange County VA home buyers, Fannie Mae and Freddie Mac. There are several reason why 2010 will be another big year for the FHA program.
Reasons Why FHA is Better for Most Placentia Home Buyers
- FHA only requires a 3.5% down payment. Realistically, any buyers with less than 20% down would most likely go with FHA, unless they qualified for the VA loan program, which is $0 down. Also, some properties which are being sold by Fannie Mae qualify for the Fannie Mae HomePath Mortgage Program, which has no Mortgage Insurance, No Appraisal, and only requires 5% down.
- FHA is more flexible with credit scoring. This is not to say that FHA is “the next subprime”, but most Orange County FHA lenders will allow FICO scores as low as 620, even with only 2.5% down payment. While VA is also flexible with FICO scoring, even the Fannie Mae HomePath program requires a 660 for 95% financing. With normal Conventional Fannie Mae financing, having a score below 660 will have a dramatically bad effect on the borrowers interest rate. FHA does not have the same “pricing hits” for low FICO that Fannie Mae and Freddie Mac have. The result is that someone even putting even 20% down but with a 620 FICO score, would potentially have a higher interest than someone putting 3.5% down in an FHA loan with the same 620 FICO score.
- FHA is more flexible with the use of “non-occupying” co-borrowers. There are situations where a self employed home buyer may not be showing enough income on their tax returns to qualify for a mortgage. If they have a relative who has low debt to income ratios, the relative could help the buyer get qualified for the loan.
FHA is not just for Placentia First Time Home Buyers. FHA can also be used by previous or move up home buyers. This is very helpful for those home sellers who have lost equity in their homes who still want to buy another home.
Placentia First Time Home Buyers have until April 30, 2010 to get a signed contract so they can qualify for the $8,000 First Time Buyers Tax Credit. Now is the time to begin the process. The first step is to call a Placentia FHA Loan Expert who can help buyers through the financing stage of the home buying process. Finding out how much of a loan you qualify for is a very important first step. Once PreApproved for a mortgage, you will be able to confidently begin the home search.
Authored by Tim Storm, a Placentia, CA Loan Officer – Please contact my office at Trust One Mortgage for more information about a Placentia, CA home loan. 877-786-4243 x 7.
Contact me for your Placentia FHA Mortgage:
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*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829
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