Brent Bruce's Mortgage Insights

The following article was published in 6 Southern California regional newspapers on December 6th, 2009

By Brent C. Bruce

Big Loans – Little Down with F.H.A

Five years ago loans insured by the F.H.A (Federal Housing Administration) were all but extinct in Southern California. Alternate loan programs were easier and faster to qualify for. If you were interested in using an F.H.A. loan to buy a house, you would soon find that the maximum loan amount for the F.H.A. was really too low to buy anything in the area anyhow.

Then, the housing market crash and subsequent banking crisis of 2006 changed the world for banks and mortgage lenders. The federal government reacted by looking to the Federal Housing Administration. Within months they revised and improved the long lost F.H.A. loan and today it is gaining ground to become the most popular loan used by today’s home buyers, even in Southern California.

The biggest change to the F.H.A. program has been the increased maximum loan amounts. These new maximum loan amounts are surprisingly liberal and they vary by county and property type as well. Here is a current list of the maximum F.H.A. loan amounts by county.

*According to U.S. Dept. of Housing, Mortgagee Letter 09-50

These high loan amounts are a surprise to most potential homebuyers. To imagine buying a $500,000 home in San Bernardino County and only being required to make a 3.5% down payment is amazing. Conventional mortgages can require 10% or more for a down payment on a home at this price.

If you are interested in buying a property with multiple units, such as a duplex, it becomes even more beneficial. In Los Angeles County you can buy a duplex for over $900,000 and only be required to make a 3.5% down payment. A conventional mortgage to make this purchase would require 20% down or more.

The traditional advantages of F.H.A. loans still apply such as allowing a seller to credit a buyer up to 6% of the sale price to help pay for the closing costs, and relatively liberal qualification guidelines.

As I mentioned, these large loan amounts have not always been available through the F.H.A. home loan program. The maximum loan amounts have been adjusted higher and lower many times over the last few years. As of November 25^th of 2009, the Federal Housing Administration has extended these maximum loan amounts through December 31^st 2010, but keep in mind that they have made changes mid year before and very well may again.

As with all good things, there are some details. You must occupy the property as your primary residence. If you are buying a multiple unit property you must occupy one of the units, but you are allowed to rent the other units out for income.

Also, once the loan amount is over $417,000 it is considered to be an F.H.A. Jumbo Loan. As you would expect, the interest rates are slightly higher on the F.H.A. Jumbo Loans, but not by much. All other qualification factors for the F.H.A. Jumbo Loans are essentially the same as for the standard F.H.A. loan. As always, individual lenders guideline can vary.

For now these accommodating loan amounts are here. Talk to your mortgage professional about taking advantage of this outstanding opportunity to buy the big house with little down.

Brent C. Bruce

Branch Manager

Allied Home Mortgage Capital Corp.

8480 Red Oak Street

Rancho Cucamonga, CA 91730

Phone 909-463-4750