Pat Niverson
Real Estate Loan Production Manager, American First Credit Union
Cross the Threshold to Homeownership
with an FHA Loan
People who have limited credit history or past credit problems may find it difficult to qualify for a conventional mortgage to buy a home. In many cases, an FHA loan can help. For example, recent graduates and those with limited assets may be able to obtain an FHA loan with two years of documented history such as school enrollment or a current job.
Q: What is an FHA loan?
A: It is a mortgage that is insured by the Federal Housing Administration. The insurance on the loan allows American First Credit Union to offer you a better deal, including low down payment and easy credit qualification. An FHA loan requires a down payment of only 3.5%, and the money can be a gift. FHA loans can be used to buy or refinance a home and are not limited to first-time home purchases. However, they are limited to owner-occupied properties; second home and investment properties do not qualify.
Maximum loan amounts vary by county; the maximum limit for Orange County, California, is $729,600 and interest rates on FHA loans are slightly higher (about 1/8%) than conventional loans.
Q: Is an FHA loan a subprime loan?
A: No. An FHA loan gives borrowers who have had a few bumps in the road with their credit history an opportunity to qualify for a home loan. All borrowers must meet FHA requirements.
Q: What makes an FHA loan a good option compared to conventional mortgage loans?
A: FHA loans offer a variety of unique benefits and protections:
- Low down payments. You only need to put down 3.5% of the purchase price of the home. All of the money for the down payment and closing costs may be a gift from someone such as friends, family, an employer or a charity (sellers and brokers cannot provide the gift). Other loans don't allow this. With other loans, typically at least 5% of the down payment must be the borrower's assets.
- Easier to qualify. The qualifying requirements you must meet to get
an FHA loan are less stringent than those you would have to meet to qualify for a conventional mortgage. You can qualify for an FHA loan even if you have little credit history or non-traditional credit history.
- Help keep you in your home. The FHA has been around since 1934 and will continue to be here to protect you when others walk away. Should you encounter hard times after buying your home, FHA has many options to help keep you in your home and avoid foreclosure.
Contact an experienced FHA home loan expert at American First Credit Union. Visit www.amerfirst.org or call 800 / 290-1112, Ext. 5092.
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