With all the tightening guidelines, there is still one bright spot in the mortgage lending world. FHA loans are expanding their offerings, with higher conforming loan limits (see these higher conforming loan limits by California county here), down payment assistance programs and other legislation in the works to expand these programs, FHA loans are fast becoming the loans of choice.
One of the largest benefits of FHA loans these days is the potential for 100% purchase financing. FHA loans cap out at 97% loan to value on a purchase, but with down payment assistance programs, and allowable seller credits up to 6%, it is realistic to be able to structure a purchase loan for no money down, or very little money down. Essentially, 100% purchase financing.
Additionally, for many borrowers who have seen the value of their homes decrease, all the while watching the date creep closer and closer to when their adjustable note is going to adjust, FHA loans offer high loan to value refinance options. FHA loans offer refinances up to 95% loan to value. Additionally, FHA loans do not automatically cut the LTV in markets deemed declining as Fannie Mae and Freddie Mac loans do.
This offering of high LTV loans for refinancing allows many homeowners the ability to refinance out of their adjustable rate mortgage, even though their loan to value may be higher than when they originally took out that loan. Pair this with the increase in loan limits, and this has opened the door to many California homeowners to use these FHA loans, whereas their loan amount may have been too large to fit under the limit before.
For those looking for a California refinance, FHA loans offer a great option to take advantage of the historically low fixed rates that are still on the table. Feel free to contact me for more information on FHA loans, or if you are in the market for a purchase or refinance in California.
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