FHA (Federal Housing Administration) Loans

WestAmerica Mortgage Company is a Direct FHA Lender who specializes in loans for first time home buyers. FHA home loans can offer low interest rates and more flexible underwriting guidelines for borrowers who have less than perfect credit. However, there are mortgage amount limitations for each county in the United States. Please check limits for fha mortgage loans here. These loans requires 3% down payment but it can be a 100% gift or you can use down payment assistance program such as Nehemiah. Also, the seller can pay up to 6% of the purchase price in closing costs and the monthly PMI is lower than most 3% down conventional loans. Finally, it is one of the few loan programs left which allows an underwriter to take into account extenuating circumstances such as job loss, long-term illness, and death in the family as legitimate reasons for credit issues and they can manually approve a file on a case-by-case basis. See official Federal Housing Administration website for more detailed information and check out 100 questions and answers about buying a new home.

Let's take a look at a few FHA Loans:

Nehemiah Down Payment Assistance Program

Nehemiah is a non-profit organization which offers assistance with down payment and closing costs. The catch is that the seller must give these funds back at closing to Partners in Charity plus a $499 administrative fee. Most of the time this program works best with a For Sale By Owner situation because the seller is motivated to sell the property. Also, the seller will usually receive a tax break for the gift. Usually, the seller will build the down payment, closing costs, and administrative fee into the purchase price so he walks away with the money he wants. Finally, you should find a good realtor who can negotiate down payment and/or closing costs with the seller.   

Let’s take a look at an example:

Assumptions: Seller lists a home for $170,000 but wants $160,000 bottom line. We will utilize an FHA 30 year fixed program with 3% down payment and $4,400 closing costs which can be 100% gift from Nehemiah. The appraised value of the home is $170,000.

At closing, Nehemiah will gift $9,500 ($5,100 down payment + $4,400 closing costs) to you and the seller must give Partners in Charity $10,000 ($9,500 plus $499 administrative fee) but he will walk away with approximately $160,000 bottom line and everybody is happy.  The seller sells the home for the money he wants and you pay no down payment and closing costs. Visit GetDownPayment.com for more information on the program.

2-1 Buydown FHA Program

This program is an FHA 30 year fixed program with a temporary decrease in rates for the first 2 years. The mortgage payments are pre-determined with the initial payment being calculated at a rate which is 2% below the final rate. The interest rate will increase 1% per year for the next 2 years and will remain at that final rate for the duration of the 30 year term. Here is an example:

Assumptions: 2-1 buydown with 4.75% rate (APR 4.92%) check today's loan rates: $170,000 purchase price, $2,000 real estate taxes, and $600 year home insurance.  

The Principal and Interest payment for a 30 year fixed mortgage at the current rate of 6.25% would be $1,046 per month which is $57 lower than the final payment $1,103 on the buydown loan, but the program allows you buy much more house with a 4.75% initial rate. In this case you would be able to purchase $25,000 more house on the 2-1 buydown program which can get you an extra bedroom! This loan is well-suited for a first time home buyer or young professional whose income situation will improve over the next few years, but they want the best home they can afford today. Finally, you can utilize Nehemiah Down Payment Assistance with this program. How can you beat that?  

FHA Kiddie Condo Program

If you are a parent, FHA has made it easier for you to help your son or daughter purchase a new home. Instead of paying rent on an apartment, your son or daughter may be eligible to purchase an FHA eligible property (singe family residence, townhome, or condo, etc.) with the assistance of his or her parent(s).  Furthermore, your son or daughter does not need a job, credit history, or sufficient funds in his or her bank account for the down payment.  The parents, however, must have sufficient credit, income, and funds to pay for the closing costs and down payment but they do not have to live in the property. Finally, this program is available to borrowers, other than parents,  related by blood (siblings, aunts & uncles, etc..), or for unrelated individuals that can document evidence of a family-type longstanding and substantial relationship not arising out of the loan transaction.   

Please contact Gerald Tribuzio at 847-516-5743 or email jtrib@firsthomebuyers.net if you have questions or want more details on these great programs. Please apply for fha mortgage if you would like to get pre-approved today for this program.     

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