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  • Federal Housing Administration (FHA)

  • On average, about 95% of my first time buyers utilize the FHA mortgage loan program.  An FHA loan is perfect because it is backed by the federal government, and allows you to get into a home for as little as 3.5% down payment, and even allow low credit scores for those with less than desirable credit.

    The Good:

    - I can structure most deals to only require the 3.5% down payment as the only monies needed to buy a home.

    - The seller can pay up to 6% of your closing costs called "Seller Assistance".  Usually this covers the entire amount due.

    - Interest rates are usually lower than Conventional since the loan is backed by the government.  The only circumstance where a Conventional Loan may be lower is the following scenario (20-25% down, 740+ credit score, and loan size over $175,000).

    - Credit scores allowed down to 500's, however, my company has a cutoff at 620 since the rules get much tighter below the 620 threshold, and 98% of clients with a sub 620 score are not approvable.

    - Rehab loans are available called an FHA 203k Streamline.  This means you can purchase a home, and finance in up to $35,000 of improvements to the home.  This means you can install those new countertops, cabinets, floors, etc.  You can take that home you like, and turn it into the home of your dreams!

    - Maximum Debt to Income Ratio of 56.999% (this means you qualify for more home using an FHA loan than a Conventional Loan).

    The Bad:

    - The mortgage insurance fee you pay each month is not based on risk, but a standard percentage set by the government for everyone regardless of credit score, loan size, or down payment).  Also, the mortgage insurance never goes away (unless you refinance out of an FHA loan and into a Conventional loan after a few years, which is what most of my buyers do).  We can usually do this refinance with no cash out of pocket needed from you, along with saving some money each month too!

    - The home must pass the governments safety standards, which include no chipped or peeling paint around the home.  It must be in good, livable, move-in-ready condition.

    - A one time Mortgage Insurance Premium (1.75% of the loan amount) is financed into the loan for the government.