For most of my first time buyer clients, FHA is, without a doubt, their best option for purchasing their first home here in LA & Ventura counties.  For many first time buyers around here, they have been sitting on the sidelines for years waiting for the market to do exactly what it's doing:  for home prices to fall and rates to remain historically low. 

First and foremost, one of the best advantages of an FHA loan is the 3.5% minimum down payment.  For many first timers who don't have the means to make the required 10% down payment for a conventional loan, FHA's modest requirement is just the ticket. 

Furthermore, FHA has relatively simple qualifying terms:  minimum 620 median fico score and no reserves.  Unlike FHA's qualifying terms, a conventional loan will often include adjustments/add ons for lower fico scores and may require varying degrees of reserves. 

Another benefit of an FHA loan is that FHA allows non-occupying co-borrowers (n/o/cb) to assist in qualifying primary borrowers.  Now, while conventional loan programs also allow n/o/cb, with a conventional loan, as much as half of the 10% must come from the primary borrowers own funds.  With an FHA purchase, the non-occupying co-borrower can provide the entire 3.5% required down payment in the form of a gift. 

This one feature alone has made home ownership possible for so many of my first time buyers here in LA & Ventura counties.  For many of my first timers, getting a little help from their family enabled them to realize their dream of homeownership. 

Another advantage of an FHA loan is their monthly mortgage insurance (MMI) in comparison to a conventional loan program's private mortgage insurance (PMI).  FHA's MMI program is more affordable than conventional's PMI program, even with conventional's lower loan-to-value (ltv) requirement. 

Quite often, I have run the two scenarios for a client and have been able to show that even with a larger down payment, a borrower will pay less mortgage insurance with FHA's MMI than with conventional PMI and that is assuming that my first time buyer client can even qualify for PMI.  Guidelines for conventional PMI coverage are more stringent than FHA's MMI coverage. 

And last but by no means least, FHA loans are not subjected to the HVCC appraisal process.  This feature alone can be one of the best reasons to go with an FHA loan instead of a conventional loan.

In today's lending environment, the loan transaction can be fraught with so many issues that can literally make or break the whole deal.

The appraisal process is simply one phase of the transaction and complicating the process by subjecting it to the extremely flawed HVCC process can make an already scary and stressful situation for many first time buyers an even more nerve-racking and frustrating experience.  Personally as well as professionally, I won't subject any of my first time buyer clients through that if it's not necessary. 

This post is just the first in my series of affordable loan options available to first time buyers here in LA & Ventura counties.  Check out the next post in the series where I address how first time buyers here in LA & Ventura county don't have to worry about how they're going to make that run-down, dumpy, dilapidated REO they want to purchase habitable.

FIRST TIME BUYER OPTIONS IN LOS ANGELES & VENTURA COUNTIES - PART 2: FHA 203k is the Best Option for Many First Time Buyers in Today's REO Market

FIRST TIME BUYER OPTIONS IN LOS ANGELES & VENTURA COUNTIES - PART 3: Down Payment Assistance Bridges the Gap to Homeownership

FIRST TIME BUYER OPTIONS IN LOS ANGELES & VENTURA COUNTIES - PART 4: 100% Financing Still Exists for Some Buyers

If you're interested in purchasing your first home here in LA or Ventura counties, contact me about affordable home loan options that you may be eligible for.