FHA Expert

7 Replies

Hi guys,

I've been a bit absent from BP for the last few months as I'm one step away from being a licensed agent in CA. That one step being them finally allocating me my number after passing the test back at the beginning of April. It's a slow process...

Being a person in his mid 30's and living in LA the majority of my friends are renters because they feel as though they can't afford a place here. So my goal is to educate them with an investor mindset and convince them that buying isn't out of their reach.

My grasp of FHA loans is fairly good but I'd really appreciate a keen eye to look over something I'm putting on my site as part of that education. Please feel free to critique and offer suggestions.

I really appreciate all your help and it's good to be back!

First Home Buyers

Buying your first home is both an exciting time and also a daunting one. Being a person in his mid 30's I'm surrounded by friends who have been long time renters. They hate the idea of what is almost like flushing money down the toilet each month. Of course the problem they have living in LA is that even the cheaper condo's are still out of reach in their eyes. The down payment being their biggest hurdle.

This isn't necessarily true. There are government backed incentives to help first home buyers escape the rental market and start putting their hard earned money back into their own property. The most well known program is called a FHA loan. Remember the names Fannie Mae and Freddie Mac back in 2008 when the market crashed? Well these guys are now your friend. They will help you to purchase your first home with as little as 3.5% down. So for a $300,000 condo that equals to only $10,500.

So what's the catch you say?

Apart from the usual expenses associated with owning a property such as property taxes, HOA fees, maintenance and major repairs there's a fee called PMI. Private Mortgage Insurance is how the FHA loan protects it's lenders from you defaulting on your loan and the property going into foreclosure. Typically this is calculated at 0.85% of the original loan amount. This used to be 1.35% however at the start of 2015 the government lowered that rate to help you first timers even more. Remember the government wants you to be a home owner too so don't be afraid to lean on them for help.

The good news is however once you've paid off 20% of your original loan and it's been at least 5 years, then this PMI in no longer deducted. You can then decide to use that extra money to pay off your mortgage faster, pocket it for use at a later date or just spend it.

There are also local programs that will help you with buying your first home. This is one I know of in Los Angeles.

http://www.lacdc.org/for-homeowners

So don’t think buying your first home is impossible. It is possible if you’re prepared to think outside the box. Helping first time buyers is something I have a passion for and I look forward to helping you with this exciting chapter in your life.

Be sure to take a look at the official government website for more information or contact your mortgage broker.

http://portal.hud.gov/hudportal/HUD?src=/buying/loans

I have contracts with LACDC, they are more servicing the low income individuals, there are strict rules, limits, and qualifications for their loans and etc.

@Shane Willcox Slight correction. With FHA, less than 10% down, MIP (PMI is on Freddie/Fannie)is for the life of the loan, no way to eliminate it without paying it off. PMI on Fannie/Freddie can be eliminated after 5 years, with 20% equity.

Thanks @Manolo D. That probably won't work on the westside then? I would imagine most of the applicants would have too high an income?

Do you know of any other incentives locally that aren't as strict?

Wayne is spot on about differences in FHA/conventional. PMI, if I remember correctly, has to be removed once your loan hits 78% of the original loan. If you think your home has appreciated more before that then most lenders will have you pay for an appraisal and see if you qualify to remove PMI. MIP, as Wayne said, is FHA version of PMI and stays on for the life of the loan(refinance to get rid of it at 80% LTV).

Fannie Mae 3% program.

http://www.fanniemae.com/portal/about-us/media/corporate-news/2014/6203.html

@Shane Willcox For the westside? No, these programs usually have loan limits around 300-450, with household income limits of around 50-100k. Some city CDCs might have different programs, but you get the picture on price range.

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