FHA Home Loan
An FHA loan is insured by the Federal Housing Administration, which lets lenders say yes to buyers a conventional loan would turn away. It is the most common route to a first home in California.
In plain language
Because the government insures the loan, the lender carries less risk and can accept a smaller down payment and a lower credit score than a conventional loan allows.
In exchange you pay mortgage insurance: a one time premium usually financed into the loan, plus a monthly amount. That is the trade, and for most first time buyers it is a good one.
This is probably you if
- You have 3.5 percent to put down rather than 10 or 20
- Your credit is fair rather than excellent, or your file is thin
- You have had a rough patch. FHA is far more forgiving of a past bankruptcy or foreclosure than conventional lending
Three steps, in order
- We confirm the property qualifies. FHA has condition standards, so a house needing major work may need a Rehab loan instead.
- We document income and credit. The debt-to-income guideline is 43 percent by hand, and higher through automated underwriting when the rest of the file is strong.
- You close with 3.5 percent down and the mortgage insurance built into the payment.
What people ask me
On most FHA loans taken with the minimum down payment, the monthly premium stays for the life of the loan. The usual way out is refinancing into a conventional loan once you hold 20 percent equity, which is a conversation worth having a few years in.
No. That is the most common myth about it. FHA is open to any buyer using the home as a primary residence, whether it is your first or your fourth.
The programme allows 3.5 percent down at 580 and above, and there are paths below that with a larger down payment. Score alone rarely decides it. Recent payment history matters more than the number.
Worth a look while you are here
Fixed Rate Mortgage
One payment, one rate, for the whole loan. The default for a reason.
Read moreVA Home Loan
No down payment, no monthly mortgage insurance. The strongest loan in the country, if you earned it.
Read moreRehab Loan
Buy the house and fund the work in one loan, at mortgage terms.
Read moreThink FHA Home Loan might be the one
Let us confirm it against your actual numbers before you fall in love with a house.