Home prices are pretty high in the Silicon Valley. Here, where sometimes wages are comfortable and disposable income or savings pretty low, it is good to remember that it is still possible to purchase a home with as little as 3.5% downpayment.
How is it possible? with an FHA loan, which is an (almost) normal loan, guaranteed by the Federal Housing Administration.
How does it work? Well it is fairly easy in fact - there are few limitations: the buyer does not have to be a first-time home buyer, there is no limitation of income for the buyer, and the property purchased can be pretty much any price. The loan amount is limited to about $730,000.
So I like to remind my clients of this option if they have little savings or family help for the downpayment, or if their salary is modest: they can still think in terms of homeownership while prices and interest rates are low. It is quite a good loan, with an attractive interest rate (at or slightly lower rate than a normal conventional loan).
It is a little more expensive to get: there is a 1% upfront fee for the mortgage insurance and a fee of about 1% every year on the amount of the loan. Note: If it is used to purchase a condominium, the complex has to be FHA approved.
If you know someone who wants to take advantage of such a loan program let me know: I will share names of lenders who know FHA loans well. Time is also important: the loan limit will go down on October 1st to $625,500.
Thanks for reading, and sharing!
- Since 1985
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A link of interest: American Legion Santa Clara Post 419