Many Pasadena home buyers are exploring the various financing options.  FHA financing offers opportunities to many.  But, is FHA right for you?

Many people have a misperception about FHA financing. It is too expensive, it’s more difficult to qualify and FHA has very stringent requirements about the property. The truth is that FHA financing has some wonderful uses that may help many home buyers and homeowners.

• The most obvious is that it is the ONLY program that allows the buyer to purchase a home with a 3.5% down payment all of which can come from a gift. Conventional financing requires a 5% down all of which must come from the home owner.
• FHA is the only program that allows for a parent who is not going to occupy for the property to qualify for the loan.  The primary occupant does not have to even have an income as long as the parent/non occupant co borrower’s income is sufficient. Conventional financing requires the person who is occupying the property to fully qualify for the loan.
• Borrowers who have low FICO scores and a smaller down payment will often have a better rate on an FHA loan than a Conventional loan even after mortgage insurance is calculated into the equation. Low FICO scores on Conventional loans often push the rate much higher than a similar FHA Loan
• FHA will allow an individual who has recently sold a home as a short sale to obtain new FHA Financing if:

o   They were current on their mortgage and Installment debt at the time of their short sale

o   They are purchasing a home of lesser value and smaller than the home that was sold via short sale.

o   Short Sale lender accepted proceeds from short-sale as payment in full.

Typically three years must pass after the short sale for a buyer to be eligible for new financing.

• Homeowners with loan amounts up to $729,755 (this loan amount will depend upon the county in question) who cannot obtain a conventional refinance due to the depreciation of their property may qualify for an FHA refinance up to 96.5% of their home’s value.  Depending upon the loan amount the maximum financing for conventional loans is 80% with loan amounts over $625,500 and 90% with loans under $625,000.

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FHA financing is an excellent tool for first time home buyer’s with limited funds and income to qualify for a new home. It allows for more flexibility in credit criteria, lower down payment and parameters that often make it easier for a buyer.  With recent changes purchasing a condominium has become more difficult with FHA financing. The Condominium project must be FHA approved. Your lender can look this up on the FHA web set and provide you with a list of approved projects in a selected area.  A project can also be approved on a case by case basis but plan on at least a 60 day period for the lender to complete the FHA project approval process.

The most important element to FHA financing is to work with a lender that has expertise in this product and understands when FHA financing would be the more beneficial over conventional financing. FHA is not for everybody but in many cases gives Pasadena homebuyers and opportunity to purchase they wouldn’t have had otherwise.

You can reach Mondie at (626)233-1303.