Dear Dominik,

FHA loans are more common now than in the past for just that reason, the low down payment requirement of 3.5%. All loans require at least 2 yrs employment, 2 yrs rental history, proof of income and money for your down payment. However, the FHA is known for a common sense approach to loan approval. The borrower does not have to fit into a specific box. Don't get me wrong, they're not doing funky loans or giving away free money but the guidelines are flexible enough to give a person who has no credit a loan if they have stable employment and savings, etc.

FHA loan rates are very competitive. In addition, a borrower can get their down payment as a gift from a relative or they can use down payment assistance from a governmental agency like SHIP.

Remember FHA loans are for primary residences only and borrowers can't use more than 1/3 of their income towards their mortgage.

FHA also requires appraisals from FHA certified appraisers. The heydey was due in large part to speculators and some unscrupulous appraisers, mortgage brokers and realtors. Most of those parties used conventional loans - interest only, no verifications, stated income - to keep the bubble going.

FHA loans were and continue to be less risky because of their approach to underwriting. Yes, it may require more paperwork, but the paperwork is to protect the consumer and the intergrity of the loan.

Patrick's experience sounds as if he was trying to get an FHA Spot Approval for a townhome or condo. Those are hard to come by and the lender should have disclosed to all parties that there is no guarantee if the complex was not FHA approved to begin with.

Best of Luck,
Jacqueline Clarke
Down Payment Assistance Specialist/Loan Officer
Enterprise Mortgage Group
Winter Park, FL
Direct: 407-739-3853
Email: jclarke@enterprisemortgagegroup.com

Hi Dominik - You hit the nail on the head! The increase in FHA loan limits to $729,950 will now allow many more first-time buyers to get a 30 year fixed rate loan with only 3.5% down! The rates are hovering around 5.25%! Throw in the $8,000 tax credit you'll get by purchasing this year, and the existing benefits of homeownership; Mortgage Interest Deductibility, Real Estate Tax Deductability ($250,000/$500,000 Cap Gains Exclusion) and you are really in a win-win scenario. This really is the beginning of the turn around and the smart buyers are already out there looking for real! Martha Longhi, Buyer’s Agent, RE/MAX Dolphin (650) 787-9980

Dominik
no special requirements.
lender will verify income and credit.
max FHA loan is $729,950.
any qualified buyer can get an FHA loan.
i just closed a FHA loan for a first-time buyer - they got a 30 year fixed rate loan at about 5% and were able to purchase home with $10,000 out of pocket - they do qualify for $8,000 first time buyer tax credit so essentially they have bought a house with about $2,000 cash investment. they loan is a fixed rate loan so they do not have to worry about their payments going up.
let me know if you would like a referral to a good FHA lender.
Arn

I understand that the credit score for FHA has gone up to 620.

Yes, it does seem like the old days. However FHA loans do require more paperwork than coventional loans, including all addresses the borroiwer has lived at for two years, two years' worth of income tax returns, gross monthly salary, employer information, and W-2's going back 2 years. Strong credit scores are required. There are additional closing costs encountered with an FHA loan. Also, the 'home' must qualify or if in a developemnt the 'complex' must qualify. That means going through the FHA appraisal process. We just had a deal that took 3 weeks for the complex to be approved. FHA approved the project but the borrower couldn't supply 'seasoned' money and the loan was rejected in the 5th week. So the process can be rough but if borrower and seller have patience it could work out. It is however a long cry from our no doc loans that got us into this mortgage mess.