FHA loans were initially designed to help low income families borrow money to buy a new home. It would provide lenders with insurance while the insurance premiums were paid by the borrowers. FHA primarily serves people who cannot afford a conventional down payment or otherwise do not qualify for PMI (Private Mortgage Insurance) insurance. The FHA loan program is a federal assistance mortgage loan insured by the Federal Housing Administration.



I heard a radio advertisement indicating that the lending limit on FHA loans was raised to over $700,000. The commercial did not indicate the area that limit would apply. The assumption by the listener is that it will apply to me. Reality is it will not apply to the greater Sacramento area. I find these types of advertisements a disservice to the public and in part the reason for the problems currently facing the real estate and lending industries.





The bill that did pass through Congress and was signed by the President raised the limit to 125% of the median sales price in the area to a maximum of over $700,000. These temporary limits will remain in effect until the end of 2008. That said, this is a great opportunity for first time home buyers.



And What An FHA Loan Isnt



FHA insures the lending institution against loss of principal in case the borrower fails to meet the terms and conditions of the mortgage. The borrower pays an insurance premium for the lenders protection and receives two benefits: a thorough appraisal by an FHA approved appraiser and a lower interest rate on the mortgage than the lender might have otherwise charge for the loan.

There are FHA programs that offer fixed rate mortgages for 15 or 30 years, as well as adjustable rate mortgages tied to an index; also available is financing for adding energy-efficient features to new or existing homes.



The most popular FHA loan has a minimum cash investment from the borrower of 3% of the purchase price; but allows 100% of the money needed at closing to be a gift from a close relative, friend, or grant money. FHA lending guidelines are not as strict as those for conventional loans backed by Fanny Mae and Freddie Mac. One advantage of an FHA loan is it can be assumed but a new qualified owner who takes over the monthly payments saving the fees associated with acquiring a new loan.



For up to the latest changes to FHA limits and qualification criteria contact your trusted mortgage broker and my team member Evangeline Scott who is a Certified Mortgage Planner at Summit Funding at teamscott.net or (916) 496-0160.



Contact me today so we can develop a game plan to get you on the road to owning your first home. If you have any questions regarding the real estate market and what is real and what is hype call me.