LOAN TYPES

 

The Pros and Cons of an FHA Loan in Sacramento, CA

United Wholesale Lending Is a Professional Mortgage Broker Offering Loans in the Greater Sacramento Area.

Find Out How You Can Get an FHA Loan!

The beauty of FHA loans is that they allow so many more people to buy a home. Call today and let our trusted team explain all the pros and cons of an FHA loan.

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What Is an FHA Loan?

Federal Housing Administration loans (FHAs) are backed by the government so that approved lenders can offer home finance to buyers who aren’t eligible for a traditional loan.

The FHA doesn’t actually issue mortgages, it provides mortgage payment insurance so borrowers can get a home loan through an approved lender. Mortgage insurance premiums cover the cost of the Federal Housing Administration (FHA) guaranteeing your loan and protecting the lender from losses if you default.

FHA loans make first-time home loans and house ownership available to people who would otherwise not be able to afford them. They were designed for borrowers with a less-than-perfect credit rating but are today used by a broad range of people.

Requirements for an FHA Home Loan

Because there are a variety of FHA home loans, the credit restrictions are more flexible, though the loan requirements are more stringent. The main advantages are that you can apply with a lower down payment and a less-than-perfect credit score.

Self-Employed

If you’re self-employed, you’ll have to provide two years of tax returns, and a statement of your financial position. Loans are sometimes available if you’ve been self-employed for less than two years, but you’d need to have had a good credit score preceding self-employment and be engaged in the same or a similar line of work.

Bankruptcy or Foreclosure

Foreclosures and bankruptcy aren’t necessarily a bar to getting an FHA loan, so long as you have already started to rebuild your credit. In general, the lower your credit score, or the down payment you can afford, the higher your interest costs will be. It must be at least two years since you filed a Chapter 7 bankruptcy, and if you’ve been foreclosed on, it must have happened within the last three years.

FHA Loan Benefits

FHA loans help people get into the housing market by allowing borrowers with bad credit, no credit history, or who have had financial problems in the past, to get a loan. FHA loans are also excellent for buyers who want a first-time home loan or homeowners who want to move to a better property.

Today’s home buyers like this type of loan because it has more flexible underwriting rules, lower down payment options, and there is a wide range of loan plans to choose from.

Mortgage Insurance Premiums (MIP) Make FHA Loans Possible

Many FHA loans are available in Sacramento, CA, and all of them are made possible by MIP. Loan terms can vary between 15 to 30 years and borrowers need smaller down payments. This is perfect for buyers who need a first-time home loan in Sacramento. Funding for the down payment can also come from a gift.

FHA loans in Sacramento are available on many types of properties and one of the unique features of an FHA loan is the ability to refinance your current home. This is the easiest way to refinance as there is no credit qualifying, no income verification, and no appraisals.

Find Out More About Refinancing

FHA for Seniors

Many people don’t think about how important it is for seniors to have the freedom to move to a new home, but often older buyers want to be closer to their family, move to their dream location, or just buy a smaller home that is easier to take care of. Seniors can use FHA loans to refinance or get a mortgage, though they would need to prove income for the latter.

Debt-to-Income Ratio

The U.S. Department of Housing and Urban Development has established criteria for lenders to follow when determining the debt-to-income ratio. To ensure that a borrower’s pension and 401k funds will continue to be available, the lender has to contact the borrower’s old company to confirm the amount and duration of their pension.

It may also be necessary for the Social Security Administration to verify the income of a borrower and check whether any benefits will expire in the initial three-year period of the loan. If they are due to expire, the borrower won’t meet the loan eligibility criteria.

Equal Credit Opportunity Act

If your 401(k), pension, or Social Security benefits are set to continue for at least three more years, you may be eligible for an FHA loan and, if your finances meet the FHA’s requirements, your age or retirement status won’t matter when applying for a loan. Lenders cannot discriminate against a borrower’s age because of the Equal Credit Opportunity Act.

Other FHA Loan Considerations

FHA loans in California are meant to finance your principal residence, and they cannot be used for purchasing portfolios or rental properties. Mortgages are available on many different types of properties including townhouses, terraced houses, and certain kinds of condos.

FHA Loan Approval

To get FHA loan approval, you will need to establish that your monthly repayments, HOA fees, property taxes, mortgage, and homeowner’s insurance are less than 31% of your gross income. You’ll also need to hire an FHA-approved appraiser to assess the property. If the home you want to buy fails to satisfy specific FHA requirements, and the vendor refuses to make any necessary repairs, you will have to pay for them at closing.

Contact UWL Today to See If We Can Help You Refinance or Buy Your Next Home

At United Wholesale Lending, we offer a variety of loans to borrowers in the Greater Sacramento area including Roseville, Rocklin, Granite Bay, Folsom, El Dorado Hills, Loomis, Auburn, Natomas, and Elk Grove.

Call our trusted team today to learn more about how we can help you.

Apply Now

Fixed-Rate Loans

Fixed-Rate loans are the most popular type of mortgage loan because the loan is based on an interest rate and monthly Principle / Interest payment that does not change over time. The property taxes and insurance costs may fluctuate, but many borrowers find fixed-rate home loans to be the best mortgage for their needs because they can create a budget and rely on a steady payment. Fixed-rate mortgages are offered on all Conventional, FHA, VA and Jumbo loan products

Most company’s offer fixed-rate mortgages in terms of 15 or 30-years, however, you can ask for alternatives such as 10 or 20 year terms. The longer the term, the higher the interest rate will be. The longer term however, generally creates a lower payment because the payback is spread out over more years.

FHA
  • Minimum Down Payment: 3.50% which can come as a “gift” from approved sources

  • Up Front MI of: 1.75%, can be added to Loan

  • Monthly MI of: .85%

  • Maximum Loan Amount SFR: Loan amounts are set by counties. In many northern California counties, the limit is $474,950. Loan amounts above $417,000 have additional costs and or rate increases. In the San Francisco Bay Area, FHA loan limits are as high as $625,500.

  • Maximum Seller Concession: 6%

  • Minimum FHA FICO requirement without additional down payment requirements is 580…but most companies require at least 620.

  • Refinancing is allowed, at high loan to value ratios

  • Both Fixed-Rate and Adjustable-Rate loans permitted

  • Roof & Pest inspections not mandatory unless noted by appraiser or called for in contract

  • No Income Limits

  • Do not have to be a first-time buyer

  • Must be owner occupied

  • No requirement for reserves when purchasing a single family dwelling.

  • Non-Occupying co-borrowers allowed

  • Can utilize other state, county and city programs, and Energy Efficient Mortgage options

  • FHA requires 90 days from date of trustee sale before purchase contract can be written unless REO is a federally chartered bank

  • FHA Loans are Assumable

USDA Loans
  • 100% financing with no down payment for certain qualified transactions!

  • Property must be 8 acres or less

  • Property can’t have a pool

  • Properties must be located in eligible rural areas (generally towns with a population of 20,000 or less that are removed from an urban area)

  • Income limits are 115% of the U.S. Median Income (for most counties, the 4 person household income limit is $65,000 maximum)

  • No cash reserves are required

  • Borrowers are not required to be first time homebuyers

  • No Loan limit restrictions

  • Minimum credit score of 620 from most lenders

CalHFA
  • 30-Year Fixed-Rate Mortgage at below market rates (in most cases) for first-time buyers

  • Government Insured/Guaranteed Loans

  • 30-Year Fixed Government Insured/Guaranteed Mortgage. This program is for mortgage loans that are insured or guaranteed by FHA, VA or USDA and features a 30-year term with a low, fixed interest rate

  • Real Estate Owned (REO) Loan Programs

  • CalHFA Community Stabilization Home Loan Program. This program helps first-time home buyers purchase vacant home that are owned by participating financial institutions in certain area of California.

VA
  • One of the only 100% LTV programs around. No down payment required

  • Loan amounts above $417,000 require a downpayment

  • Must have DD214 with honorable discharge

  • Must be owner occupied

  • Bankruptcy and foreclosures do not necessarily eliminate veteran from qualifying– looking for 2 years in most cases

  • No cash reserves required

Reverse Mortgages
  • Must be 62 years of age, or older

  • Must be owner occupied

  • Must be able to demonstrate your ability to pay your property taxes and insurance

  • Available for most property types – Single Family, FHA approved condominiums, PUD’s and manufactured homes that meet FHA and lender guidelines

  • Can be used as a tool for guaranteed income, periodic payment of obligations, or in purchasing a home with no mortgage payment

Adjustable-Rate Loans

An adjustable rate mortgage differs from a fixed-rate mortgage in a lot of ways. Most importantly, with a fixed rate mortgage, the interest rate remains the same during the life of the loan. With an ARM, the rate changes periodically, usually in relation to a financial index, and the payments can go up or down depending on how the index performs.

All ARM’s have some common features. Basically, they are the adjustment period, the index, the margin, the note rate, initial rate, interest rate caps and payment caps (see the attached descriptions).

Payments are calculated by adding the margin set by the lender to the particular index. Some common indices utilized include:

  • Cost of Funds Index

  • Treasury Bills

  • LIBOR

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