FHA Loan

San Diego Mortgage FHASan Diego Mortgage | FHA Financing

The Federal Housing Administration (FHA) insures Private loans created in the Free Market on new and existing homes throughout the Country.  The FHA was formed in 1934 by Congress in an attempt to reduce lending risk on loans being issued by the major banks for Home mortgages and specifically new home purchases.  Basically, to help make sure the Banks make huge profits, even if it’s at the expense of the American Tax-Payer.  A lot of people think F-H-A stands for “First-time Homebuyer Association” or something similar, but FHA loans are for everyone and not just first-time buyers.  FHA Refinance Loans are very powerful and the process is streamlined nicely.

Advantages of an FHA Mortgage in San Diego:
#1 –  Low down payment.
You only need 3.5% down to purchase a home with an FHA loan.  That’s pretty amazing vs. 10-20% for a Conventional Mortgage.  Of course, You can use a larger down payment with an FHA loan if You so choose.

#2 –  The source of Your down payment can be a Gift!
As long as You can document where the funds came from, a Family member can “gift” the entire amount needed for the down payment with an FHA loan.

#3 –  Easier to qualify.
With an FHA loan, You can borrow money to buy a home with a 620 credit score.  Now, 620 Credit is D- credit if we’re being honest, but it won’t keep You from becoming a Homeowner if You can qualify otherwise!

#4 – The loans are “Assumable”.
Meaning, You can transfer the loan You have to someone else that buys the House from You, assuming they qualify for an FHA loan. This could be great if You have a particularly good interest rate or if the rates were a lot lower when You acquired Your FHA loan.

#5 – High loan limits.
Right now, the biggest loan You can get with FHA financing is $697,500 for Real Estate in San Diego County.  That’s pretty amazing given the stereotype of the individuals who supposedly use FHA loans.  Almost 700k will buy a Palace these days!

So what is the Downside to an FHA Mortgage in San Diego?
#1 – The property You want to buy MUST be FHA Approved.
If it’s not, there is a possibility You can get it approved, but that could take a long time.

#2 – FHA loans require a 1% Fee for “Mortgage Insurance Premium” (MIP) be rolled into the loan to start.
The 1% is of the proposed loan amount, so if Your loan is for $400,000, the up front MIP is $4,000.  It does get rolled into the loan, so the affect is minimal to the payment.

#3 – There is also a recurring monthly mortgage insurance premium.
The amount is anywhere from 1.15% to 1.10% annually.  This is also added to the monthly payment.

#4 – The worst part about FHA loans is that You start off up-side-down.
If You are only putting 3.5% down, then financing MIP for 1% along with other closing costs, the day You close on the Home, You’re under water.  It takes 6-7% of Your home value to Sell Your home with Realtor fees, etc. involved.  This is the biggest draw-back in my opinion.  Most people don’t think about it this way, but it’s a fact, so there You have it.

All in all, FHA financing is an incredible tool for any Home buyer looking for a low rate, low d0wn-payment San Diego Mortgage.  I’m here if You have questions or comments. Just use the form below.

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