The Federal Housing Administration is insuring loans for people looking to purchase a home or refinance a home with a little equity. The program insures loans up to the maximum loan limit in the county in which the property is located.
Using Sonoma County, California, as an example, the maximum loan limit for 2016 was $554,600. This number is rising to $595,600 for 2017. This represents a significant change for people looking to purchase a home who have good income, sufficient credit, and a healthy debt-to-income ratio who are otherwise tight on cash to close. This applies to a home buyer by allowing them to purchase up to $615,000 in the county of Sonoma with just 3.5% down. This change represents bigger borrowing power in nearly every county across the United States.
The fact that both FHA and the Conforming loan balances are now higher in nearly every county nationwide represents a growing trend of a more exuberant economy. Higher loan balance limits can mean the difference between renting and owning for many. This is particularly beneficial because the FHA Loan, while allowing a low down payment, is also very flexible in unique or difficult circumstances consumers sometimes are faced with.
Some of the things included are:
- Debt-to-income ratios as high as 55%
- Credit scores as low 580 for loans up to $424,100 and 640 score for loans exceeding $424,100
- Waiting time on previous short sale: three years
- Waiting time on previous foreclosure: three years
- Waiting time on previous Chapter 7 Bankruptcy: two years
- Will allow a borrower to refinance a second mortgage up to 96.5 loan-to-value
If you are looking to buy a home in 2017, an FHA loan could be a favorable vehicle to help get you there. An experienced mortgage lender who specializes in FHA loans may be the best place to begin looking.
Keep in mind that, before you begin the lending process—or even start looking for a home—it’s a good idea to check your credit scores to see where you stand. It will let you know exactly how much loan you’ll qualify for. Also, it’s a good time to pull your credit reports to ensure there aren’t any mistakes, which could hurt you.