FHA Loans San Diego
An FHA loan is a mortgage that is insured by the Federal Housing Administration, an agency with the U.S. Department of Housing and Urban Development. This insurance protects the lender from any loss if the borrower defaults on the loan and allows for lower downpayment requirements, just 3.5%, and less rigorous lending standards. FHA loans carry two different mortgage insurance premiums: the upfront premium, which is 1.75% of the loan amount and is paid when the borrower gets the loan or financed into the loan amount, and the annual premium, which is a monthly payment dependent on the amount borrowed and the initial loan-to-value ratio.
Benefits of FHA Loans
Since there is insurance in place with FHA loans, lenders will offer typically lower interest rates and more flexible qualification requirements. Loans are typically available for credit scores above 500 but the FHA can make allowances in certain situations for applicants who have what it calls "nontraditional credit history or insufficient credit". Lenders can also offer some relief to borrowers with an FHA loan who have suffered a serious financial hardship and are struggling to make their payments. This may include a temporary period pf forbearance, a modification to the loan that would result in a lower interest rate or extend the payback period, or even a deferral of part of the loan balance at no interest.
For most borrowers, the FHA requires a minimum downpayment of only 3.5% of the home purchase price. The FHA also allows the home sellers, lenders or builders to cover some of the closing costs, such as an appraisal, title expenses or credit report. This is often used as an incentive for the borrower to commit to a purchase. Despite this, the lender usually charges a slightly higher interest rate if they agree to pay closing costs. Borrowers can compare loan estimates from competing lenders to help them choose the best option.
The FHA has a special loan product called a 203(k) for borrowers in need of extra cash to make home repairs. A big advantage to this product is that the loan is based not on the current appraised value of the home but on the projected value after the repairs are completed. A "streamlined" 203(k) is also available which allows for borrowers to take out up to $35,000 for nonstructural renovations such as painting or replacing fixtures and cabinets.
How to get an FHA Loan
Since the FHA is not a lender in itself but an insurer, borrowers need to find an FHA-approved lender to acquire their FHA loan and does not go directly to the FHA. Not all FHA-approved lenders offer the same interest rate and costs-even on the same loan. Get in touch with us today to learn about unbeatable FHA loans!
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