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Is Your New Year's Resolution to Buy a Home? Consider an FHA Loan

Are you ready to jump into the housing market?

In Sonoma County, the last two years have seen rapid sales and eager buyers. If you're among those who formerly suffered a foreclosure or if you plan to purchase your first home, you may want to consider an FHA Loan.

The Federal Housing Administration's Roots

The government created the Federal Housing Administration in 1934 to help pull the nation out of the Depression and boost homeownership. The FHA accomplished this by making mortgages available to more people.

Back then, the benefits to the FHA program included:

  • lower down payments,
  • qualifying borrowers on their ability to repay the loan (and not on their business connections),
  • establishing an amortization schedule, and
  • allowing for longer loan terms

Benefits of an FHA Loan

Today, an FHA loan is still a mortgage issued by federally qualified lenders and insured by the government. They are ideal for low- to moderate-income borrowers who can't afford to make a huge down payment.

When you qualify for an FHA loan, you can borrow up to 97% of the value of the home you wish to purchase. And the 3% that you put down on your home can come from a gift, not your savings.

An FHA loan can seem perfect but might not be. On top of your mortgage payments, you'll also need to pay mortgage insurance to a government entity that protects your lender in case you should default on the loan.

Is an FHA Loan Right for You?

In addition, there have been a series of FHA premium hikes.

In today's market, a conventional mortgage is better because you'll pay less in insurance premiums. But that's assuming that you can manage a conventional loan.

Not sure what to do? Here is a list of additional issues you'll want to consider if you're trying to decide whether an FHA loan is right for you.

  1. You'll be getting a loan from the government. Not all mortgage companies provide FHA loans so you'll want to interview your mortgage professional first.
  2. You can use an FHA loan for refinancing a current loan and select whether a fixed or adjustable-rate loan is best for you.
  3. A big plus to an FHA loan is that the down payments are lower. You won't need to come up with 20% down.
  4. FHA lenders don't demand perfect credit records. Usually, a credit score of 580 or above will help you qualify for a loan.
  5. You can use an FHA loan to renovate your existing home.
  6. It's possible that you'll receive assistance in paying associated loan costs such as origination fees and appraisal costs

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