Monday, February 23, 2009

Anaheim, CA Real Estate – Buying A Home With FHA Financing.

Anaheim home buyers, especially those with minimum downpayments are finding FHA loans to be very desirable for financing real estate in Anaheim. An FHA loan gives home buyers the option of putting down a very small amount of money, some FHA loans require as little as three percent down payment. Here is some valuable FHA loan information that prospective buyers can use while looking at homes for sale in Anaheim, CA.

FHA History

The popularity of FHA loans in Anaheim, California is on the rise. Although the institution has been around since 1934, it may have never been as popular as it is now. The Department of Housing & Urban Development (HUD) absorbed the Federal Housing Administration (FHA) under its umbrella in 1965. Previously the lack of FHA loan popularity in California was due to rising home prices and very low loan limits set by the agency. Also, the FHA appraisal guidelines were very stringent and caused frustration among both buyers and sellers in Anaheim, CA. Fortunately, both of these issues have been greatly improved.

The FHA insures loans that are made by approved lenders. They do not make loans, but only insure loans made by approved lenders who service or sell the loans on the secondary mortgage market. As long as FHA guidelines are used in funding the loan, the FHA, upon default by the borrower, insures the lender against loss. If the borrower does default, the lender may foreclose and will receive cash up to the established limit of the insurance. The lender is protected, in the case of foreclosure, by charging the borrower a fee for an insurance policy called Mutual Mortgage Insurance (MMI). The premium is paid either as a cash cost at closing or it is added to the mortgage amount. The later being the most common preference.

FHA Mortgage Limits on Real Estate in Anaheim

The FHA periodically changes its mortgage limits and as of January 14, 2009, the maximum mortgage limit in high-cost areas is 115% of the local median price, but not to exceed a maximum of $625,500. In many parts of the country the upper limit is $417,000 for a single family home and can even be lower for some depressed areas. Orange County homes, including those in Anaheim are now at the upper limit of $625,000.

Anaheim Home Buyers with Blemished Credit History

If you are looking at homes for sale in Anaheim and your credit is less than perfect, FHA might just be the loan for you. You may qualify for a FHA loan even if you have had financial problems.

1) FICO scores can be lower than those for a conventional loan.
2) Bankruptcy - You might obtain an FHA loan two to three years from the date of your bankruptcy discharge, as long as you have maintained a good credit since your debts were discharged.
3) Foreclosure - If you keep your credit in excellent shape since a foreclosure, an FHA loan may be available to you two to three years from the final date of your foreclosure.

Competitive Rates and Terms

Today’s rates and terms are very straightforward and very competitive.

1) The lenders have very little adjustments to the FHA loan rates, with the rates usually within .125 % of conventional loans.
2) Mortgage insurance is funded into the loan with just a very small premium added to the monthly payment, usually less than other private mortgage insurance.
3) As of January 1, 2009 buyers can get by with as small as 3.5% down payment. The FHA even allows downpayment money in the form of gifts from others.
4) Allowable debt ratios are higher with FHA than with the limits imposed by conventional loans. This simply means they are not as picky if you already have other debt from student loans, cars, credit cards, etc.

Fewer Required Repairs than the FHA of Yesterday

At one point, FHA repair demands were so excessive that the sellers would discount the selling price if the buyers would agree to obtain conventional loans instead of FHA. Today the requirements are much more reasonable.

1) Defective roofs that leak must still be replaced but an older roof that does not leak does not need to be replaced.
2) Windows that stick when opening or windows with cracks in the glass do not need to be repaired.

Home buyers in Anaheim should be advised that FHA appraisals never take the place of a professional home inspection. Buyers should still obtain a professional home inspection before a purchase is closed. FHA still does require some repairs to be done that a non FHA loan would not ask for. Some may consider these repairs to be “ticky tack” but they are mandatory nonetheless. This can often present a problem when the property in question is being sold “as is” such as often case with bank owned real estate.

After reading this information on FHA loans, Anaheim home buyers should have a better understanding of another type of loan available to them. An FHA loan can be extremely helpful if you are only able to make a minimum down payment and can be a valuable tool for buyers to have at their disposal. There are many important aspects to remember about FHA loans, so be sure to contact a reputable agent or loan officer with further questions about loans or real estate in Anaheim.

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