FHA mortgages have been created to help minorities and first time buyers to purchase a San Diego condo or home. Borrower must meet standard FHA credit qualifications. The borrower is entitled to approximately 96.5% of funding. This means you only need to put down 3.5% for the down payment.
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FHA financing is used more frequently today than almost any other time in history of the 76 year old Agency. Three years ago, Uncle Sam insured only 3% of total loans. Now the government says nearly a third of the loans is now government backed.
FHA insured mortgages require mortgage insurance. Mortgage Insurance is a policy that protects lenders against some or most of the losses arising from defaults on the mortgage by the Buyer. FHA Mortgage insurance is required primarily for borrowers with down payments less than 20%. This is called the “Up Front” mortgage insurance. A 2nd type of Mortgage insurance required by FHA is the “Monthly mortgage Insurance”.
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Let’s say you are buying a San Diego Condo which is FHA approved (we’ll get to that latter). Your “Up Front” mortgage insurance will be 1.5% of the loan amount divided by 12 monthly payments
The Numbers – For simplicities sake let’s say you just bought a San Diego Condo for $100,000 and putting down 3.5% ($3,500.)
“Up Front” Mortgage Insurance – $100,000 x 1.5% / 12 = $125.00
“Monthly” Mortgage Insurance – $100,000 x .55% /12 = $45.83
You as the buyer are able to finance the “Up Front” mortgage insurance into a FHA loan.
Financing “Up Front” mortgage insurance into the loan $100,000 x 2.25% = $2,250.
What this means is you add $2,250. to your loan amount and you do away with the $125.00 monthly payment. If you can afford it, this would be the way to go.
You cannot finance the “Monthly” mortgage insurance, so you have the $45.83 to pay as a monthly payment.
OK, enough with the financing, let’s talk about FHA approval. The San Diego condo or home must be FHA approved. For more information on FHA approval on San Diego Condos go to the FHA Mortgage Information Blog
All in all, going FHA is a great way to buy a San Diego Condo or home with low down payments and easier restrictions on credit ratings normally found on a conventional loan. The one drawback is the number of San Diego Condos that are FHA approved, a much lower percentage of San Diego condos are FHA approved thus reducing the inventory to choose from. (That could be a whole new article – FHA approved condo complexes in San Diego)
