What is an FHA loan?
For those of you who don’t know what an FHA loan is, it is a loan insured against default by the Federal Housing Administration (FHA). FHA insures the lender against default by the borrower, which means FHA will pay the lender back should you default. This insurance encourages lenders to make larger loan amounts to more people since the risk for them is very low.
What are the Main Benefits of an FHA Loan?
The main benefits to an FHA loan are:
- Low down payment (3.5%) required
- Easier to use gift funds for down payment
- Easier to qualify
- Credit requirements lower than most programs
Is FHA Financing Only for First Time Buyers?
No. Almost anyone can qualify. There are not any income requirements, but there are limits on the loan amounts. You need to have decent credit to qualify, but it doesn’t have to be great.
What are the 2009 FHA Loan Limits in San Mateo County?
In high cost areas, which include San Mateo and Santa Clara County, the most money you can borrow with an FHA mortgage loan are:
| Units | Max Loan Amount |
|---|---|
| 1 | $729,750 |
| 2 | $934,200 |
| 3 | $1,129,250 |
| 4 | $1,403,400 |
These are temporary increased figures and may go back down at the end of 2009.
Why You May Decide Against an FHA Loan?
If you need to borrow more than the loan limits, FHA won’t work for you. If you have more than 3.5% available for a down payment, you’ll likely be able to find better financing options provided you have good credit. Also, FHA requires an upfront mortgage insurance premium, which is 1.75% of the loan amount ($12,770.63 for a loan amount of $729,750). This upfront premium can be paid upfront, negotiated and paid for by the seller or you can finance this into the loan. You will also have a monthly mortgage insurance payment on top of your principal and interest payment.
Considering an FHA Loan?
We’ll sit down with you and review your financial goals to determine whether or not an FHA loan is the best option for you. Call us at (650) 520-0915 or send us an email at info[@]SanMateoMortgageBlog.com to schedule a free, no obligation consultation.
Other Posts You May Enjoy
- 2009 Conforming Loan Limits
- The Process for Getting a Home Loan
- 9 Questions to Ask When Financing a Condo with FHA
- How to Accept a Down Payment Gift from Family
- When Should I Run My Credit?
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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.
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