Purchase a Home in Florida with FHA Financing
The Federal Housing Authority (FHA) is a division of HUD, the Federal Department of Housing and Urban Development. FHA still provides 96.5% financing with up to 6% seller paid closing costs with scores as low as 620. FHA will also accept a 5% gift . 96.5% financing with rates in the 4's makes it less expensive to own than it is to rent. Also there is a FHA Rehab loan known as the 203K loan that allows for up to $35,000 in upgrades included in the financing.
I service the state of Florida but this page can help you if you are borrowing anywhere in the country. FHA is the mortgage program that is been basically supporting the majority of the home buying over the last two years but now we are seeing a trend away from the FHA program.
Currently, in certain counties of Florida we are seeing a problem with FHA in that sellers and listing agents are so picky they are accepting offers that have more of a down payment. Why do they do this, "Because they Can, it is a sellers market ." Also we are seeing many MLS comments that say, "conventional financing only" which points the 96.5% FHA borrower towards trying to do 95% Fannie Mae Financing. If you can do it, it actually generates a lower payment with a better outlook for getting rid of mortgage insurance. This is where I come in.
Another good reason is that many listing agents are under the impression that an FHA appraisal is tougher than a conventional appraisal. I don't really agree with that, both agencies want to ensure you are purchasing a collateral with no problems so I see that as more of a perception by many Realtors not a Fact. And don't take the Appraisers work for it, go out and get a Home Inspection.
Federal Housing Authority
Home Buyer Seminar
16 Steps of Getting a Mortgage and Buying a Home (Video)
First Time Home Buyers
Do's and Don'ts
GET Pre-Qualified - That is what I do
The most important strength of a file when obtaining financing is the job. FHA needs to see you in the same line of work for at least two years. If you are a self-employed individual, the guidelines are to show two years of steady employment. It is O.K if you have recently switched positions as long as the move is for the better and in the same line of work. I will calculate your debt ratios to verify how much home you can buy. This is all part of the pre-approval process that should take place before you go shopping with a realtor.
FHA allows for credit that is just beginning to develop but we will need three trade lines paid on time for at least one year in addition to your housing history paid on time with a check. If you need suggestions on how to build your credit profile and up your score, go to my Establishing Credit Page.
Just because you have blemishes on your credit doesn't mean that you cannot get a loan!
If a debt appears on your credit report that is being paid by another individual, we prove this by showing 12 months cancelled checks. Related links:
Funds for Closing
FHA requires 3.5% down payment coming from your own funds. If you wish to receive a gift from a family member the amount required is 5%. Usually when we are structuring financing for individuals with limited funds, we structure the financing with seller paid closing costs. This limits the amount of money out of pocket needed for closing. Ask me about this. FHA allows for up to 6% seller paid closing costs but keep in mind the borrower (s) always need to come in with their own 3.5% in the transaction.
401k for Down payment
Gifts as Down payment
Loan Related Closing Costs
FHA will look at properties that are intend to be used as a primary residence. The FHA appraisal will scrutinize the property to ensure that the buyer is not buying a "lemon". If there is substantial work that needs to be done to make the property functional, FHA has a loan for that. At this point in time I even have a FHA construction loan.
For more information with regards to preparing yourself for homeownership, please see my video series entitled: First Time Homebuyers This is a video workshop consisting of eight segments that will provide more details as to the steps you need to take in order to get ready.
Getting an Appraisal
Older FHA News from 2009
FHA Home Loans Growing in Spite of Housing Slump
With an estimated $290 billion in FHA loans projected for fiscal 2009, it's clear that while conventional lending markets are hurting the FHA is meeting a serious need for affordable home loans. According to recent press, FHA mortgages tripled in 2008; in 2009 the amounts are expected to be even higher. 2009 has seen 30 year rates on home loans drop to record lows, and homeowner bailout programs and housing stimulus plans have only made it more attractive to apply for an FHA mortgage.
Some of the most recent developments are the most helpful. First-time home buyers and home owners have heard plenty about the Obama mortgage, but the latest news is even better for many currently in the market for their first home. On May 29, U.S. Housing and Urban Development Secretary Shaun Donovan made it official; home buyers can use their 2009 First Time Home Buyer's Tax Credit (also known to some as the Obama tax credit) as a down payment on their FHA home loans.
This is done by monetizing the tax credit through a short-term bridge loan which is applied as a down payment on the FHA loan; the larger the down payment, the lower overall cost of buying that first home. According to the U.S. Department of Housing and Urban Development, FHA borrowers are now permitted to apply the 2009 tax credit to the down payment above and beyond 3.5 percent of the appraised value or the borrower's closing costs.
What's the advantage in doing so? FHA home loans already have low down payment requirements compared to conventional loans, but using the 2009 First Time Homebuyer's Tax Credit means FHA borrowers could achieve lower interest rates as a result, saving money over the lifetime of the loan.
These advances and pro-home owner incentives are part of the reason origination of FHA loans has skyrocketed in 2009; they're also the reason why HUD is requesting even more money for next year's expected flood of FHA loan applications. Another reason for the increased interest in FHA mortgages? Conventional loans are harder to come by. Credit requirements and other issues connected with conventional loans make the housing market even more competitive; FHA home loans with their lower down payments and more forgiving credit requirements offer greater opportunity to get into that first home even in a stressed-out economy.
The U.S. Department of Housing and Urban Development is requesting authority to use up to $400 billion dollars in 2010, the equivalent of more than $2 million in loans. Compare those figures with FHA loan numbers from previous years; in 2007 lending volume was at a mere $60 billion. The requested $400 billion in FHA loan money for 2010 makes the 2007 numbers look positively anemic.
Could Down Payment Assistance Programs Make a Comeback?
Government Down Payment Assistance
Down payment assistance programs were all the rage, once upon a time—until President George Bush sighed H.R. 3221, The Housing and Economic Recovery Act of 2008. Part of the act banned seller-funded down payment assistance programs such as AmeriDream, the Nehemiah program and others.
Down payment assistance programs allowed the seller and charitable organizations to contribute towards the closing costs and down payment of FHA loans. For first-time homebuyers, down payment assistance programs helped make getting that first home with an FHA loan even more affordable. When the law banning down payment assistance programs took effect on 1 October, 2008, many borrowers and lenders had to find other ways to reduce or mitigate closing costs and down payments. Now there are developments that could give hope for homeowners who want to purchase using an FHA guaranteed loan; a bill called the FHA Seller-Financed Downpayment Reform Act of 2009. This was introduced in January 2009 by Representative Al Green (D-TX) and 17 co-sponsors.
The bill is designed to, “revise the requirements for seller-financed downpayments (also known as SFDPA for short) for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act,” according to OpenCongress.org.
There are pros and cons to reviving down payment assistance programs. Opponents of the 2009 FHA Seller-Financed Downpayment Reform Act say bringing back downpayment assistance programs like AmeriDream or GrantAmerica could potentially distort housing prices. According to one site which opposes the return of seller-financed downpayment assistance, “Usually the SFDPA money comes from simply marking up the home (sic) value.”
Those in favor of SFDPA programs point out that the FHA requires a 3.5% down payment as part of the terms of an FHA home mortgage. When down payment assistance programs are available, that down payment isn’t necessarily made by the borrower. Some down payment assistance programs even offer additional money to cut the costs further. The advantage to the cash-strapped buyer is obvious. Little or no downpayment means a smaller financial drain during the transition to becoming a homeowner.
Assuming the “marking up the home value” complaint is legitimate, the issue can be viewed from a different perspective. If a buyer knows in advance that getting a greatly reduced down payment means getting a markup to offset the down payment issue, seller financed down payment assistance becomes an option--IF the buyer is willing to accept the markup.
You could choose to pay the required FHA loan down payment in full, or opt to pay a bit more over the long run to make up for not having to put a larger amount of money down at closing. The real issue is being an informed borrower, reading the fine print, and knowing how your choices about making the down payment and how much could affect your bottom line overall. Choose a larger downpayment and lower FHA loan payments every month, or accept a higher monthly bill to avoid putting a drain on your bank account. It's the informed decision that counts.
For now, the “controversy” is moot—the 2009 FHA Seller-Financed Downpayment Reform Act has not been passed or rejected. Until changes to the law are passed by the federal government, down payment assistance programs are still banned; the programs active until October 2008 are over until new laws give them permission to return to business in some form.