FHA And VA Are Back

For the longest time, FHA and VA were not useful
tools in the San Diego market. Sales prices
were too high to allow FHA and VA financing to be
viable alternatives for borrowers.

With the drop in home values, they are back and
many borrowers can now use them as effective tools
to finance their home purchases.

Let's take a look at some of the features and
benefits of these two programs.


VA

These loans are available to eligible veterans.
They require that the veteran obtain a Certificate
of Eligibility from the Veteran's Administration
that shows they have met the minimum service
standards of 181 days of active service and have
not had a dishonorable discharge.

VA loans are available for single veterans, a
veteran and spouse, or two unmarried veterans
buying together. There is no provision for a
veteran/non-veteran loan unless for a married
couple.

VA loan limits currently allow a qulaified veteran
with full eligibility to receive a loan with no
down payment up to a loan amount of $417,000.

At times, and subject to market conditions, VA
loans may exceed $417,000 with some down payment
required. VA guidelines allow for these higher
loan amounts, but the appetite by GNMA (Government
National Mortgage Association) to purchase these
loans is the determining factor for them to be
offered.

VA does require a funding fee from the veteran,
which helps defray some costs of administering the
program. For a first-time user of their eligibility
and with 100% financing, the funding fee is 2.15%
of the loan amount. Instead of the veteran having
to pay this in cash, VA allows for it to be financed
on top of the 100% loan.

For example, a home price of $400,000 would allow
for a no-down VA loan of $400,000 to a veteran with
full eligibility. The final loan amount would be
$408,600 after financing the VA funding fee.

VA does help protect the veteran by limiting some
of the closing costs that they are allowed to pay,
and makes broad allowances for a seller, or other
party, to pay expenses on the veteran's behalf.

VA's goal is to help as many veteran buyers as
possible succeed with home ownership by guaranteeing
the loan for the lender through the VA program.

If you think you are eligible for a VA loan and
want more details, get in touch with me so we can
discuss your individual circumstances.


FHA

FHA loans allow borrowers with good qualifications
purchase homes with a lower down payment than
conventional loans require.

FHA loans are generally available to any qualified
buyer and property, and are not limited like the VA
program is.

The basic FHA program allows a borrower to buy a
home for their residence with as little as 3.5%
down payment.

Similar to VA, there is a requirement for the payment
of Mutual Mortgage Insurance to help cover the costs
of the program. These loans are insured by the FHA
program to the lender.

The cost of the MMI is 1.75% at closing, which can
be financed, and .50% per year. The loan limits are
similar to VA. FHA allows for loans up to $417,000
and at times may exceed that amount if GNMA will
purchase the loans. Availability changes from time
to time.

Let's look at an example of a purchase price of
$400,000. This would require a down payment of
$14,000 (3.5%). The up front mortgage insurance
premium of 1.75% can be financed, bringing the
final loan amount to $392,755.

The mortgage payments will include the principal
and interest payment, an amount for property
taxes, property insurance and the mortgage insurance
premium (which comes to $163.65 in this example).

There are many details in obtaining an FHA loan.
They are in many ways easier to qualify for, but
attention to all the fine points is a must.

If you are hopeful to find a home, and have limited
funds for down payment and closing costs, let's talk
about how FHA might work for you.