Talking Loan Options!

There are so many loan options available and fancy ways to finance deals. However - the most common finance types are:

FHA (Federal Housing Administration)

Conventional

VA loans (Veteran Affairs)

USDA

Down Payment Assistance Programs

FHA is a popular option for first time homebuyers (but you don’t have to be a first time homebuyer to use). They allow you to put as little as 3.5% of the purchase price.

Some notable requirements/features of FHA:

- Easier to qualify if you have past credit issues

- meaning bankruptcy, foreclosure etc...

-FICO® score at least 580 = requires 3.5% down payment.

-FICO® score between 500 and 579 = requires10% down payment

-Only available on 1-4 unit properties

-Must be owner occupied

-Not always an option for condos/ properties with HOA’s

-FHA loan limit for SFR (Single Family) in LA County is $822,375

-Two part mortgage structure - monthly mortgage insurance is required for the life of the loan (unless you refi into CONVO or home was purchased prior to 2014)

Conventional loan is another option for buyers and now many first time homebuyers as they allow as little as 3% down. Unlike FHA a conventional loan is not insured or guaranteed by the government. The loan is backed by private lenders. Some noteworthy points on conventional loans:

- Can be done with 3% down

-PMI will drop off once you pay the mortgage past 20-22% original value

-Offers more options when working with student loan debt

-Conventional loans fall into two categories “conforming” and “nonconforming” loans

- conforming loans typically have a dollar limit on the amount of the loan since their

underlying terms and conditions meet the funding criteria of Fannie Mae and Freddie

Mac

-More freedom if you plan to use the property as an investment,vacation home etc…

VA loans are guaranteed by the U.S Department of Veterans Affairs. These loans are available only to active service members and veterans. You can have down payments as low as 0%.

USDA Loans are backed by the U.S. Department of Agriculture. These loans are geared toward properties in areas designated as rural. USDA may make direct loans to some low-income borrowers.

There are various DPA (Downpayment Assistance) options within CA and LA County. One commonly used program is CalHFA.

These programs typically have various requirements including being a first time homebuyer and certain income limit restrictions.

There are four main types in regards to DPA:

1) Grants, gifts that never have to be repaid

2) Loans (shows as a second mortgage) that has to be paid down along with your main mortgage

3) Loans(shows as a second mortgage) with deferred payments

4) Loans(shows as a second mortgage) that can be forgiven after a set number of years living in the home and only will be repaid one you move, sell or refinance

Make sure to consult a lender about what options work best for you and your financial situation!