In order to help the economy and make homes available to more people the Kennedy Administration introduced the concept of the Department of Housing and Urban Development (HUD). Under Lyndon Johnson this was formed in 1965. Within HUD there is the Federal Housing Administration or FHA, which administrates the government home loan insurance program. The program helps a first time home buyer, who might not qualify with a conventional loan to qualify, because the risk is removed from the lender by FHA who insures the loan for the lender. (The program is not exclusive to first time home buyers.)

203(b) is the most popular home buyer program. This is a standard fixed rate loan for a single home or a unit up to 4 owner occupied houses and only requires 3% from the borrower as the down payment. The government also allows that the down payment be a gift from a relative, a non-profit organization or a government agency.

The idea behind an FHA home loan for a first time home buyer is for the credit requirements to not be as strict as conventional loans sold to Fannie Me and Freddie Mac by most lenders. The rules regarding acceptable FHA loans have changed and may continue to change. We keep up with these requirements and work closely with the FHA and lenders to help first time home buyers obtain a loan even with limited credit.

In addition, the FHA will allow closing costs to be wrapped up into the loan and the monthly mortgage insurance premium is lower for an FHA loan verses a conventional loans. Also FHA loans require less income as conventional loans require the loan expenses to be in the low 30% (under 35% and close to 30%) and the FHA allows up to 41% loan costs as a percentage of total family income.

FHA loans are available to anyone, first time home buyers or fourth time home buyers and can be for purchasing or refinancing or even rehabbing an owner occupied home. The only disadvantage to an FHA home loan is there is a loan limit. See the list of California FHA Loan Limits provided by county.

Let us help you achieve the very best loan rate and the maximum loan amount. Give us a call and we will work closely with you to help you achieve your goals.

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