FHA Loan Information and Basics

March 14, 2008

FHA loans are becoming some of the more popular choices, and should continue to increase in popularity over the coming months. FHA programs feature mortgage insurance programs to help low and moderate income families obtain financing by lowering some of the costs of their home loan. FHA mortgage insurance also gives incentive to companies to fund these loans that may not meet today’s stringent requirements. By protecting the lender against a loan default, it reduces that lenders risk, and makes the loan more appealing.Additionally, FHA loans have other benefits. Downpayment requirements can be lower than other conforming loan programs. In today’s market, most people are going to need to put down a minimum of 5-10% on a purchase. FHA loans, under their section 203(b) can allow a downpayment of as little as 3%, allowing financing of 97%.

Also, many closing costs can be financed with an FHA loan. With most conventional loans, the borrower must pay these closing costs. If they allow the seller to pay the costs, they usually cap this concession at a maximum of 3% of the loan amount. FHA programs allow the borrower to finance many of these charges, and also allow the seller to pay a larger portion.

Some fees are limited under FHA rules. FHA has limits on some of the fees that can be charged in association with your loan. These fees are capped at a level that is reasonable and customary, as determined by the local FHA office.

Finally, the limits that are in place for maximum loan amounts under FHA loans are fixed. These have been raised, however, through the end of 2008, making it a great time to ask about an FHA loan. To see the new limits by county for California, take a look at my conforming loan limit post, which breaks down these limits county by county.

If you would like to contact me regarding your California home loan options, please feel free to do so. I am always happy to discuss the options available to you. Additionally, with the increased limits, now is an excellent time to revisit your existing loan, or look at purchasing a new home. Remember, these limits are currently only in place through the end of 2008, after which they are anticipated to go back to the old limit of $417,000.

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