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FHA loans are back in style…in a big way!

Are you aware that if you are purchasing a primary home today with 1-4 units you can qualify for an FHA loan?  There are tremendous benefits to you for this type of loan.

Some of the benefits are:

• Only 3.5% down payment required
• Loan amounts up to $729,750
• Current 30 year fixed interest rates are around 5%
• Can purchase a duplex, tri-plex, or 4-plex (as long as you live in one unit)

These benefits are HUGE!

Any conventional loan today, requires a 20-25% down payment of your own hard-earned money.  The lenders have become very strict.  They will not allow the down payment to come from a seller carry-back anymore.  This leaves the homebuyer with three real options.

Option 1) Hard money lenders – The problem with hard money is that it is very expensive (around 15% annual interest), and the hard money lenders insist on being in the “first position” which means if the property goes into default that they get paid back first before the 75-80% loan (major lender) is repaid.  This will not fly for any bank.

Option 2) Cash – You will need to deposit 20-25% down on the property.  This is no different than how it has always been done.  However, most homeowners in the past had the luxury of selling their homes in order to buy another one (and usually getting a bunch of appreciation and/or principle reduction from the mortgage to roll into the new purchase).  The larger down payment was not as painful to them.

Option 3) FHA loan – You only need to have a 3.5% down payment.  This changes everything.  If you have some cash saved up, you can take advantage of awesome interest rates, super-low home prices (note I did not say values), and you can hold onto your current home as a rental.

This allows you to buy a new home, and set yourself up for the long-haul.  By renting out your current home, you may experience some positive cash flow as you hold it.  Then as home values rise again, you could sell the rental (or not).

One thing that has been plaguing investors during this real estate slump is that they need huge down payments to purchase these distressed properties.  For investors, the leverage simply is not there from the lenders.

Great interest rates.

Great home prices.

No leverage.

As a primary occupied homeowner, you now have extreme leverage with an FHA loan.

For homebuyers interested in purchasing a fixer to rehab, the FHA also has a loan for you.  It is called the FHA 203(k) loan.  It has the same benefits of a regular FHA loan with the added feature that allows rehab costs to be factored into the loan.  Please consult a loan officer for more information.