FHA Loans are all the rage in this market, but what are they? They're a type of loan put together by the federal housing administration (FHA) that's very common for first time homeowners (FTHers) and low to moderate income families.

One of the reasons it's so popular right now is because homes have dropped in price meeting an FHA loan limit guideline as well as low interest rates. It's also popular because of the low down payment. With a conventional loan - which everyone used to use, you had to have a 10% minimum down payment but with an FHA you only have to have 3%, sometimes less if you use buyer's
assistance program such as Ameri-Dream. Here's some stats on the FHA Loan:

- Loan amount limit for Riverside/San Bernardino County is $500,000 - OC/LA County is $729,750.
- 3% minimum down payment required - but you can get assistance with that.
- A flexible minimum credit score of 620 - but the higher the FICO the lower your interest rate will be.
- Lower closing costs than traditional loans.

There are preferable requirements for an FHA Loan such as a steady job for the past two years, a good debt-to-income ratio. (Debt-to-income ratio: how much of your paycheck goes to pay your debts each month? Example: If you make $2,000 a month and you pay $500 a month in debt your ratio is 25%) And make sure when you go to talk to the lender you have your tax returns, w-2's and bank statements.

In order to obtain an FHA loan the property you will be purchasing has to meet health and safety standards. The home can't have broken windows or exposed wires, there needs to be doors, a working stove, heater and toilets. Make sure you understand all these requirements when looking at homes. If the home is missing some items you can request that the seller fix those items, but each home should be handled on a case-to-case basis.

There are a million more reasons why FHA loan are so popular right now but remember what I tell you today about FHA applies to today only. The real estate and lending market is changing everyday so when you go to purchase a home talk to your Realtor and lender about current FHA terms.

This blog is specific towards residential real estate in Southern California and is intended for informational purposes only and should not be construed as real estate or financial advice. The information in the blog is opinion of Sara Kirk and not the opinion of Tarbell, Realtors. When posting a comment your personal information will not be shared or sold to anyone.