In the wake of the housing bubble’s collapse, FHA loans San Diego have taken on renewed importance for today’s mortgage borrowers. An FHA loan is a mortgage insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development. Borrowers contain FHA loans pay for mortgage insurance, which ultimately protects the lender from a debt if the borrower decides to not follow through on the loan. Due to that insurance, what lenders can and do, is offer FHA loans at an inviting interest rate and with less strict and more versatile qualification requirements. Further on, seven facts are listed that all buyers should know about FHA loans.
1) Less-than-perfect credit is OK
As of September 2010, credit scores for FHA loans San Diego depend on the type of loan the borrower needs. According to the FHA, scores should be 580 or better.
• Those having credit scores between 500 and 579 are restricted to borrowing 90 percent loan-to-value.
• A credit score of 500 or less is not suitable and therefore you are not qualified.
• The FHA will make accommodations under certain circumstances for applicants who contain “nontraditional credit history or insufficient credit” only if they meet the requirements.
2) Minimum down payment is 3.5 percent
Required by the FHA, a down payment of just 3.5 percent is needed of the purchase price of the home. This is a fraction of the what is typically required on majority of other loans and like the senior director, compliance and fair lending at Treliant Risk Advisors and formerly a vice president of government programs for another lender, Dennis Geist calls it a “huge attraction.” The down payment can be used from the borrowers personal savings. Other allowed sources of cash may include a gift from a family member or a grant from a state or from a local government down payment assistance program.