I've been providing more and more FHA loans over conforming lately. It's really not too surprising. FHA pricing has been very competitive with both rates and mortgage insurance--especially if your credit score is below 740 and if you don't have 20% for a down payment. FHA mortgages can go up to 97% loan to value (3% down) on purchases.
FHA mortgages are a "full doc" loan meaning that you will need to provide a 2 year employment history (your education can count towards this if it's related to your employment) along with 30 days of income. In addition, your down payment must be documented (bank statements, asset accounts--all pages) and any large deposits to your asset accounts must also be documented. FHA also allows for sellers to pay for your prepaids and closing costs as long as the buyer has met the minimum down payment/investment which is currently 3% (increases to 3.5% on October 1, 2008). Family members can gift the down payment/required investment and for a limited time (October 1, 2008), down payment assistance programs are allowed (hurry on that one if you're at all interested).
FHA is not credit score sensitive--however for best pricing, the lowest mid score of all borrowers should be 600 or higher. FHA does weigh the borrowers credit history--the last 12 months need to be free of late payments.
FHA has upfront and monthly mortgage insurance which stays with the mortgage until:
- 60 payments have been made on time AND
- The mortgage is at 78% of the original balance OR
- The mortgage is terminated (from refinance, paying off with cash or selling the home).
Do make sure that you're working with a lender who is approved to provide FHA loans. You can check HUD's site to be sure. Many lenders are not and may try to keep your application and illegally broker or receive compensation from another lender. I've noticed a scary trend of local lenders (not approved) trying to scoop FHA biz and it's been a nightmare for unsuspecting borrowers. Also ask your Loan Originator how long they have been originating FHA mortgage loans--you'll want someone with enough experience to care for a purchase as significant as your home.
Today's FHA Mortgage Rates for Pierce, King and Snohomish Counties (as of 2:30 pm August 28, 2008)
30 Year Fixed for loan amounts up to $362,790: 6.250% (apr 7.059%)
30 Year Fixed for loan amounts up to $567,500: 6.375% (apr 7.181% ). Note: after December 31, 2008, the FHA (and conforming) Jumbo loan limit will be reduced to $522,100 for the tri-county area.
To see what rates I'm quoting live, follow me on Twitter. Remember, rates change constantly (often several times a day).
Rhonda Porter, Certified Mortgage Planning Specialist and Licensed Loan Originator 510-LO-32047 at Mortgage Master Service Corporation.
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August 29th, 2008 
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