Hello Marisol,

Sounds like you got lots of good advice from the previous responders. Sometimes there is no advantage to doing an FHA loan. A good lender can assist you with finding the appropriate loan for you, whether it is an FHA or Conventional Loan....or perhaps, in your case it might be a Washington State First Time Homeowner's loan. Not all lenders do the WA State loans....so make sure you are talking to a lender who can offer that service to you, if you qualify. If you haven't found a lender yet, a seasoned real estate agent can ask you a few questions and get you pointed in the right direction. I am happy to answer any further questions you may have. Keep up the good work.... You are doing the right things by asking the quesions. Kathy Exit Real Estate - Jones & Associates 509-270-2133

FHA is one of the few programs that will allow minimum down (which can be gifted), has reduced monthly mortgage insurance and does not penalize borrowers with higher interest rates who have credit scores under 720.

I have written several articles on FHA mortgages--you can review them by clicking the link below.

FHA are government backed loans so they promise the lender if you efault they will buy the house so you are less of a risk to the bank and can buy with less down. But really a good agent can look at your situation and make recommendations. There are many loans and one size doesn't fit all. An agent can also negotiate so that you can buy with little or no money down and no closing costs. feel free to call us or visit our website and read our blogs on home buying and getting a loan. 509-362-1966

There are lots of reasons to go FHA......less down payment requirement (3%), loan limits go up to $271,000 (which means around a $279,000 purchase price; there are lots of homes in the Spokane area in that price range) debt to income ratios more lenient, credit scores more lenient, and seller contribution to buyer's costs more lenient. We have excellent lenders we can recommend who can provide you with all the details. Your best route to take is to hire an agent (that would be "Better Call Carol or Go See Greg" team, and a lender. In this way you can get all the answers to your financing questions but get good information on homes which fit your criteria. Look forward to hearing from you. Contact Carol and Greg at cgroves@windermere.com or 509-994-0047 or 509-979-1962,

Hi Marisol - FHA financing is more lenient on credit issues and credit scores as well as qualifying debt to income ratios than a Conventional mortgage. FHA only requires a 3% down payment and rates are currently better than a Conventional mortgage with 3% down plus the monthly MI (private mortgage insurance) on an FHA loan is lower than on a Conventional loan. FHA does have an upfront mortgage insurance premium that is financed into the loan and then the monthly MI to FHA is lower (i.e. FHA monthly MI on $150,000 = $62.50 VS. Conv MI on $150,000 = $120). Conventional 3% down programs also require a minimum mid score of 680 whereas FHA can go down into the 500s. FHA allows the seller to pay up to 6% of the sales price towards a buyers closing costs and prepaids plus they can pay for the owners title policy. In addition to that, the seller can participate in a non-profit down payment assistance program to contribute an additional 3% towards your down payment. With the right seller and the right property, a buyer can get into a home on FHA with -0- out of pocket. On Conventional financing, the maximum the seller can pay towards your closing costs/prepaids is 3% of the sales price plus they can pay for the owners title policy. The 3% down payment has to come from your own funds and cannot be a gift. FHA is geared towards first time homebuyers, low to moderate income households and buyers who have had some credit challenges here and there but are now back on track for at least the last 12 months. Both FHA and Conventional loans are submitted through an automated underwriting system for loan determination, however, FHA will allow for a loan to be manually underwritten directly by the underwriter if an automated approval cannot be obtained whereas with Conventional financing you have to have an automated approval or it won't work.

If I can be of any further assistance, please let me know. Good luck with your home search. Cornerstone Mortgage Company is approved to lend in all 50 states so if I can assist you in any way with financing, please let me know.

Sincerely,

Katie Sparkman
Sr. Loan Officer
Cornerstone Mortgage Company
972-238-7400, ext. 104
ksparkman@houseloan.com

Kamusta Kayo Marisol!

Ok I agree with Chris mostly, he is correct in his figures ....except when he says: "However, it is always good to put any money down and pay your own costs if you at all can..." ... then I do not agree totally. What he says is true only if the seller has no equity left at all and you must add in your costs by raising the sales price or if the seller would have came down on price but now instead of you getting that discount the seller is using it to pay your fees/costs....then yes you could be actually financing in your costs and having to pay them in your loan whereas a down payment in real cash avoids that...but let me explain it another way ok. –

First, I am a Broker and my younger son is a Banker and 5 of my family members are also Realtors... and sometimes we as a family do not agree on strategy when putting in an offer. One thing we all agree on is that many times money is left on the table, or in other words a buyer does not get the best deal.., due to them or their agent not having a good strategy and negotiating skills. I am assuming at this point that you DO NOT have an agent and are beginning your search. – You need a good, strong negotiator for an agent.

In today's market, as you may know, sellers are having a hard time in getting their homes sold. Some are desperate to not hurt their credit, yet they hold on to a sales price that is too high for the market. Some of these people have good equity in their homes and some do not. Those that do have good equity can often times be convinced to take a lower offer by simply showing them the facts concerning local sales in terms of what is selling and what is not…. and at what prices. You REALLY need to have a great real estate agent who is sharp, savvy, up to date on current trends and willing to submit the offer themselves to the seller.

Ok - Here is how we get it done and this is important to remember. "Back in the day”, perhaps 10-20 years ago anyway, it was common for a Buyers Agent to actually call the Listing Agent and arrange for a time to present his or her buyer's offer in person.... but, in my humble opinion, too many Listing Agents today are not aware that it is still permissible and proper for a Buyers Agent to present the offer and the Listing Agent many times will feel as though they are loosing control or may have fear that their client, the seller, will be upset by an offer that is too low etc. However, please know this.... its YOUR AGENTS RESPONSIBILITY to represent you to the best of their ability, period. Not to just fax your offer over to the other agent and sit back to wait for the best results. That should only be done if it’s a done deal to begin with and the agents have conferred or bargained ahead of time as to what the best deal can be, albeit, that is not recommended in general. I could write a whole article about that one topic, but suffice it to say that your great agent can do some research ahead of time to find out when the house was last sold, how much is estimated to be owing on it now and should be able to find out how motivate the seller is and so on, sometimes even the Listing Agent will give up these details willingly. When the seller is properly approached…, it should always be with humbleness and in a kind way but with a show of strong conviction that this is a good offer.

I hope this has helped you in some way to see that yes, when the seller has equity still in their home…, then the seller can pay for your down payment and closing costs and you will not need to finance it into your loan at all. Your agent must be strong and find all the hot buttons, facts and details ahead of time….then go present your offer!

All my best,
-Don

Maraming salamat po

Hi Marisol, great question and thanks for asking! Fha loans, like lori stated are government backed and insured loans so they do require 3% down payment and PMI (private mortgage insurance). Typically you can figure your out of pocket money on an Fha deal will be 6% total at closing (3%down pmt & 3%closing costs). You can however negotiate the seller to pay that 6% for you and essentially get a home for $0 out of pocket. However, it is always good to put any money down and pay your own costs if you at all can because when the seller pays it for you your essentially financing those funds depending on how you negotiate the deal anyway. Fha is going to be used a lot more these days with the fall in subprime lending which means 100% conventional financing is really non-exitstant right now, they want money down. Fha loans will be used much more now as a way for people with lower incomes and credit scores to purchase a home. The bummer of it is the PMI insurance that you will continue to have to pay which is money that doesn't go towards buying down the amount financed on your home.....it's just a payment for mortgage insurance. Not a huge amount of money though. Another upside to Fha loans is that the Fha appraiser goes through the home with a finer comb making sure that the value is really there and the home is solid,safe and in good repair, it it's not, they will require the seller to make necessary improvements to make it so prior to closing the deal. I hope this helps and if you have more questions as it is a complicated subject I would advise you to contact a reputable lender who can best explain the differences and your options. I am happy to give you a referal if you need one or please feel free to contact me with any questions I can further help you with, my website is located below. Most sincerely, Chris Warmuth Windermere/North.

FHA requires 3% down vs the higher downpayments. These are typically insured mortgages, so PMI would be required. Depending on your credit scores, you may find some other perks at this point vs conventional mortgages. There are many new guidelines and more coming out that will offer variations depending on credit scores. The best place to start is a credible mortgage Broker. If in CT, I can help you find one.