FHA Loans

FHA Loans for Easy Home Financing

If you’re interested in purchasing a home but may not qualify for conventional financing, you may want to consider nonconventional loans like FHA loans. Nonconventional loans are privately funded like conventional loans, but are backed by the federal government. FHA loans, in fact, are insured through the Federal Housing Administration, a division of the U.S. Department of Agriculture (USDA). Because they are secured through a federal department, FHA loans are low risk to the private lenders who fund them, which means they can approve a broader segment of people. They have amazing benefits, including as little as 3.5% required down payment. Read on to learn more about the basics and benefits of FHA loans. When you’re ready to learn more about mortgages for purchase in Anaheim, Riverside, Long Beach, Carson or nearby California, contact BBC Group.

The Basics of FHA Loans

FHA loans were first developed by the FHA in 1934 toward the goal of encouraging private lenders to fund loans to borrowers who may not otherwise qualify for a conventional mortgage. Conventional mortgages are fully funded and insured through private companies, without government sponsorship. Lenders are more selective with approval for conventional loans, because they pose a higher risk than nonconventional, federally backed loans. Clients with less-than-great credit or who aren’t able to raise at least 20% down payment may not qualify for a conventional loan, but may still qualify for an FHA loan.

There are other types of nonconventional loans, including VA loans (sponsored by the U.S. Department of Veterans Affairs for veterans, servicemembers and certain others) and USDA loans (sponsored by the U.S. Department of Agriculture for rural development).

FHA Loan Requirements and Limits

While the FHA insures these nonconventional loans, they do not determine whether a borrower is ultimately approved – that determination is made by the private lenders who fund the loans. To get approved for an FHA loan with as little as 3.5% required down payment, you will need a credit score of 580 or higher. If your credit is between 500-579, you may still get approved, but must submit a 10% down payment. Your down payment may come in the form of a gift from a loved one, and down payment assistance programs exist if you still aren’t able to raise enough cash up front. If the seller of the home you buy agrees, you can also put in your mortgage contract that they pay up to 6% of the loan value to pay toward closing costs.

FHA loans have limits for one- to four-unit homes. In Orange and Los Angeles Counties, they are:

  • $679,650 for a one-unit home
  • $870,225 for a two-unit home
  • $1,051,875 for a three-unit home
  • $1,307,175 for a four-unit home

In Riverside County, the limits are:

  • $405,950 for a one-unit home
  • $519,700 for a two-unit home
  • $628,200 for a three-unit home
  • $780,650 for a four-unit home

It’s important to note that FHA loans may cost more over time than conventional financing. These and other nonconventional loans, however, can serve as a great starting point in your journey as a homeowner, with many refinancing options available down the line.

We’re Here to Guide You

When you’re ready to learn more about FHA loans, other nonconventional loans or conventional loans, the BBC Group has the answers you need. We have a long history helping clients in Anaheim, Riverside, Long Beach, Carson, and nearby neighborhoods get the right financing for their needs.  Contact us to get started.