Sonoma Home Loans

FHA Loans

couple happy with a FHA loan

FHA Loans From Sonoma Home Loans.

The Federal Housing Authority (FHA) provides people who don’t qualify for a traditional loan a way to purchase a home. The federal government backs an FHA loan, insuring the mortgage payments against default. Approved lenders are protected from the risks associated with approving loans for people who can’t make a sizeable down payment or have lower credit scores. As a borrower, you are responsible for paying an annual premium for the insurance the government provides.


An FHA loan makes buying a home more affordable for many, and it is a popular option for a wide range of homebuyers. With this type of loan, the down payment is much lower than the typical 6-20% that is required in a traditional loan.

Pros and Cons of FHA Loans.

Understanding the pros and cons of a FHA Loan and its financial impact will help you determine if this loan option is right for you.

Pros

You may qualify with a lower credit score than conventional loans.

You may qualify with a higher debt to Income ratio.

You can put as little as 3.5% down.

Often times the interest rate is a little lower than Conventional.

Cons

You have a Financed FHA funding fee of 1.75% of the loan amount.

You will have mortgage insurance for the lifetime of this loan, until you refinance into conventional.

FHA loan limits can be less than conventional loan limits in certain counties.

FHA may not be approved to lend on many Condos.

FHA Loans Eligibility Requirements.

A government-backed loan has more flexible requirements than an adjustable or fixed rate mortgage. If your credit score is lower than 620, you may still qualify. Your mortgage payment cannot be more than 30% of your gross monthly income. You will need to demonstrate that you can make the required down payment and verify your income. You must be able to show that you have been consistently employed for at least the past two years. Those who are self-employed may still qualify, as well as those who have committed bankruptcy or have a past foreclosure.


Some people may qualify for grants that cover the down payment cost. Additionally, lenders, sellers or builders have the option of covering a portion of the buyer’s closing costs. When you purchase a home with an FHA loan, the house is subject to stricter standards during inspections.

FHA Loan paperwork
Happy family in their new house

Is a FHA Loan Right For You?

There are numerous benefits to an FHA loan, though your interest rates will be higher than a conventional mortgage. These loans provide a path to homeownership for borrowers who don’t qualify for a conventional loan. They also offer savings on the down payment. You can choose between a 15 year or 30 year loan, giving you the same options as a standard home loan.

FHA loans are a popular choice for first-time home buyers, people who want to refinance their homes and those who wish to upgrade to a bigger house. Manufactured homes, detached family homes and condominium units are all eligible for FHA financing. If you want to refinance an FHA loan, you are not subject to income verification, credit qualification or home inspection needed.

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