Buy now with 3.5% down payment...

If you have a stable income and if you are paying too much for rent, it can definitely make sense to buy with an FHA loan. 
Many people believe that to even think of becoming a homeowner you must secure a 20% down payment.  This is difficult to do for a lot of aspiring-to-be-homeowners.  But there is another way:

think: " FHA loans ".

FHA facts to keep in mind:

- 3.5% down.  Low down payment - less money out of pocket and 96.5% loan-to-value.

- 100% Gift allowed for down payment and closing costs,

- Any buyer can buy like this, not just first-time home buyers,

- minimum FICO 640,

- Long term financing:  30 year fixed, or adjustable,

- Loan limits up to $625,500, depending on the County,

- Non occupant co-borrowers are ok

- Purchase and "refis" are allowed,

Prior bankruptcies?: yes very possibly.  See the specific rules, but on-time payments allow FHA borrowing fairly quickly afterwards.



  There are some very nice homes that one can buy for less than $500,000 in Santa Clara for instance, and you'd only need ... about $20k.  With an FHA loan you do pay what is called mortgage insurance, a way for the lender to be insured against potential future defaults.  But even with this mortgage insurance, these loans can be pretty attractive when everything is said and done, because banks do not mind doing such loans: they have ... mortgage insurance.  Hence the very attractive rates.

If this gives you food for thoughts, let me know: I can help!  ...or for someone you know, pass it along!.. 

Francis

Silicon Valley Real Estate

Local market trends

useful links

PS:  Mortgage rates: Week ending 11/3/2011

- 30-yr. fixed: 4.0 fees/points: 0.7%

- 15-yr. fixed: 3.31 fees/points: 0.7%

- 1-yr. adjustable: 2.88% Fees/points: 0.6%
(Source: Freddie Mac)

Silicon Valley and FHA loans..

Home prices are pretty high in the Silicon Valley.  Here, where sometimes wages are comfortable and disposable income or savings pretty low, it is good to remember that it is still possible to purchase a home with as little as 3.5% downpayment. 

How is it possible? with an FHA loan, which is an (almost) normal loan, guaranteed by the Federal Housing Administration.

How does it work? Well it is fairly easy in fact - there are few limitations: the buyer does not have to be a first-time home buyer, there is no limitation of income for the buyer, and the property purchased can be pretty much any price.  The loan amount is limited to about $730,000.

So I like to remind my clients of this option if they have little savings or family help for the downpayment, or if their salary is modest: they can still think in terms of homeownership while prices and interest rates are low.  It is quite a good loan, with an attractive interest rate (at or slightly lower rate than a normal conventional loan).  It is a little more expensive to get: there is a 1% upfront fee for the mortgage insurance and a fee of about 1% every year on the amount of the loan.  Note: If it is used to purchase a condominium, the complex has to be FHA approved.

If you know someone who wants to take advantage of such a loan program let me know: I will share names of lenders who know FHA loans well.  Time is also important: the loan limit will go down on October 1st to $625,500. 

Thanks for reading, and sharing!
Francis Rolland
- Since 1985

Silicon Valley real estate
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A link of interest:  American Legion Santa Clara Post 419