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That’s right! Orange County first time home buyers are finding out that FHA financing has many benefits. A few years ago FHA financing was almost extinct in Orange County. The maximum loan amount as  recently as early 2008 was only $362,790. For those that remember, not too many homes could be purchased prior to 2007 in Orange County using a loan of $362,790. With the proliferation of high loan to value (100% LTV)  subprime financing, allowing low FICO’s and little if any real income verification, FHA was not utilized very often. But we all know what happened with subprime financing. Now, FHA is back!

Orange County FHA Loan Limits Increased to $729,750

Now, as a result of the lack of mortgage financing options for home buyers, especially in areas considered “high cost” such as Orange County or Los Angeles County, FHA has increased the maximum loan amount to $729,750, while keeping the down payment at only 3.5%. Realistically, anyone looking to buy a home with less than 20% down should take a serious look at FHA. Here’s why.

• FHA allows the down payment to be a gift. Conventional financing will also allow a gift, but unless the down payment is going to be at least 20% of the purchase price, then the home buyer still will need to have at least 5% of the purchase price in their own bank account for at least a few months. FHA, which only requires 3.5% down payment, will allow the enitre 3.5% to be a gift, typically from a family member.
• FHA allows “non-occupant co-borrowers” for qualifying. This means that if the primary borrower does not qualify on their own, a relative, who does not need to be moving into the new home, can be added to the loan. The “non occ co-borrower” will need to have sufficient disposable income to actually help with the overall  ”debt to income” ratios, but this is a big plus for FHA financing versus other types of loans.
• FHA has no minimum credit score requirements. Actually, while it is great to say this, it is not completely true. FHA does not have a minimum, but most lenders who close FHA loans do have a minimum. Currently, most lenders require at least a 620 FICO score, while some will go as low as 600. Very few will go under 600, and those that will will most likely “make you pay”. Still, as compared to Conventional financing, which starts getting very difficult or expensive, even with a 20% down payment, once the score drops below 680, FHA is great. A home buyer with a FICO score under 640 should definitely compare the overall payment of a FHA loan versus Conventional, even if they are putting 20% down.
• FHA will consider financing for those borrowers who have had a Chapter 7 bankruptcy discharged only 2 years prior. Conventional wants 4 years. For borrowers who have been diligent about repairing their credit after a bankruptcy, 2 years is plenty of time to get the FICO score over 620, if not even over 700.
• FHA offers the FHA Streamline Refinance program for current FHA borrowers. This program makes it very easy for an FHA borrower to take advantage of lower interest rates, even if property values have dropped. The FHA Streamline refinance does not require an appraisal. Also, there is no income or asset documentation. The idea behind this program is that FHA wants its borrowers to be able to lower the interest rate, thus putting the borrower in a better position, even if property values or their income has dropped.
• FHA has a limit on the Origination Fee of 1%. Discount points can be used to “buy down” the interest rate.  Other types of financing do not have these types of limits on fees.

The key for any home buyer, whether they be a First Time Home Buyer or Move Up Home Buyer, is to find an Orange County FHA loan Expert and thoroughly discuss their loan options. Make sure that the payment you qualify for is a payment you are comfortable making. After all, there are a lot of good restaurants in Orange County and you’ll want to still be able to visit some of them even after you buy a home.

Authored by Tim Storm, an Orange County, CA Loan Officer – Please contact my office at Trust One Mortgage for more information about an Orange County, CA home loan.  877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829