Riverside County & Temecula Valley Seeing Increase In FHA Home Loan Requests

By admin • May 7th, 2008

Valu-Rite Appraisers has recently extended it’s coverage to include all 50 states and 1288 counties. We have seen an increase in FHA appraisal requests lately and expect to see more and more activity. We have FHA approved appraisers nationally and new appraisers join our team daily in new geographic locations.

You may ask, why the Increase? The main advantage to FHA home loans is that the credit qualifying criteria for a borrower are not as strict as conventional financing. FHA will allow the borrower who has had a few “credit problems” or those without a credit history to buy a home. FHA will require a reasonable explanation of these derogatories, but will approach a person’s credit history with common sense credit underwriting. Most notably, borrowers with extenuating circumstances surrounding bankruptcy that was discharged 2 years ago can work around the credit hurdles they created in their past. Conventional financing, on the other hand, relies heavily upon credit scoring. Credit scoring is a rating given by a credit bureau (such as Experian, Trans-Union, or Equifax) that ranks you upon your credit profile. For each inquiry, credit derogatory, or public record that shows up in your credit report, your score is lowered (even if such items are in error). If your score is below the minimum standard, you will not qualify–end of story.

FHA is one of the few home mortgage programs that allow a borrower to have their down payment gifted from a family member, a governmental agency, or non-profit organization. This allows home buyers without the necessary money to buy a home today.

Even though FHA charges an annual renewal mortgage insurance premium of 0.5% of the loan amount, this fee is generally half that charged by low down payment conventional mortgages (which range from 0.78% up to 1.01% per year). For a $100,000 mortgage, FHA would charge approximately $41.67 per month and a typical low down conventional mortgage with a renewal premium of 0.78% would charge $65.00 per month. That’s a $280 savings per year. On the other hand, if the borrower is putting 10% or more down on the property, the annual renewal premium are about the same if not lower than that set by FHA.

However, conventional financing does not require an upfront mortgage insurance premium when a borrower closes on the loan. With FHA financing, that fee for a 30 year loan is 2.25% of the loan amount (or 2.0% for a 15 year mortgage) that the borrower can wrap into the mortgage. On a $100,000 for 30 years at 8%, that’s an additional $16.51 that the borrower must pay each month. That’s almost an additional $200 the borrower must pay each year (fortunately the interest a borrower pays on his or her mortgage on a primary residence is tax deductible).

 

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