FHA financing allows borrowers to come to the closing table with a minimal down payment.
Most lenders want ten to twenty percent down while FHA borrowers can come to the table with as little as 3.5 percent.
FHA borrowers can ask for a seller credit for up to 6 percent of the purchase price to help pay for closing cost beyond the down payment. This makes FHA financing very popular because closing costs usually run at least 5 thousand dollars.
FHA loans are insured by the government and guarantees investors their money back if the borrower defaults. These loans are super popular because of of the small down payment requirements.
Twenty percent of refinance loans are FHA and thirty percent of all home loans are FHA.
Another reason FHA financing is very popular is because borrowers can have substandard credit. Currently an FHA buyer can have a credit score as low as 500.
Guidelines about to change
The seller credit for 6 percent is expected to be reduced to 3 percent.
Minimum credit scores will be increased.
One law maker has proposed to raise the minimum down payment to 5 percent.
This means it will be harder for first time home buyers and those with little saving to get into home ownership. Home buyers with substantial down payments or investors with cash will have first dips on affordable houses.
Call me if you want to learn more about this situation and how it affects you.
Mark Divittorio 530 957 1577 or email at markdevo@gmail.com
