FHA Guidelines

New FHA Loans: What You Need to Know.  Are you looking for a new home in Burbank, Studio City, Sherman Oaks or the Hollywood Hills but don’t have a big down payment saved up? Currently, FHA loan programs are a great way to help buyers afford homes.   These should go a long way in helping people obtain mortgages.

The two best features of FHA loans are: 1)Minimum down payment is 3-1/2% (not including closing costs). And 2) gifts are permitted for the entire 3-1/2% borrower investment and don’t need to be “seasoned.”

  • The interest rate is 4.35% as of this writing; however, there is mortgage insurance (see below).
  • NO MINIMUM FICO REQUIREMENT (this is huge)
  • Must be full documentation loan. No stated income loans.
  • No income limits.
  • The seller can contribute to closing costs, although the seller does not have to pay the closing costs.
  • There can be non-occupant co-signers on the loan.
  • You do not have to be a first-time buyer.
  • The downpayment can be a gift from family members, employers and non-profit organizations.
  • Down payment assistance programs are permitted, such as city first-time buyer housing programs.

Now, here’s the downside:

  • There is mortgage insurance, and it recently increased. The up-front payment is deductible from your taxes during the year that you buy.
  • There are stricter appraisal requirements for 1 to 4 units (although rehabilitation loans are available as well through the 203(k) program:
    • Any operable or useful element in the subject property must have at least 2 or more years of useful life or it must be replaced.
    • The appraiser must be FHA-approved.
    • The appraiser can require a separate inspection upon any “visible” defect or if he/she has knowledge of any existing problem.
    • The property must be structurally sound.
    • The property cannot have code violations.
    • Each living unit much contain domestic hot water, sanitary facilities and a safe method of sewage disposal. Connection to public systems is required if available.
    • Heating systems must be adequate for healthful and comfortable living conditions.
  • Condo projects must be pre-approved, which is not easy.  Also, over 50% of a new condo development’s units must already be sold.
    Condo projects must have sufficient reserve funds.For the latest in news on these and other loan programs, please visit my blog at http://sfvrealestate.blogspot.com.