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Tuesday, July 13, 2010

FHA Loans and YOU

I want to point out some things about FHA loans that you may not know. With interest rates lower than they have been since 1971, I just can't resist showing you how much money you can save!

FHA loans are not just for low-income borrowers. There is no need to substantiate income and there is no income restriction for getting an FHA loan. Even Bill Gates and Warren Buffet can get one.

FHA loans are not just for first-time buyers. As long as you are purchasing a primary residence, you can look into FHA loans as an option.

FHA loans can be large loans. In fact, the loan limit was raised to nearly $800,000. The original cap was just over $360,000, but the government raised that limit as a means to help stabilize the market. This amount varies from county to county (in Charlotte it is $296,250 and in Lee it is $356,250).

FHA loans have nothing to do with low-income subsidized housing. Both are administered by the U.S. Department of Housing and Urban Development (HUD). That is where the association stops.

FHA loans are more affordable than other loans. While they usually have about the same interest rates as other loans, they require as little as 3.5% down payment.

FHA loans are assumable. This means that if you go with an FHA loan now, when you want to sell your home years down the road, you will be able to offer the same low interest rate that you saved money on as an enticement to buy your home. This could be a key negotiating point as interest rates rise because you can show that buying your home and assuming your mortgage could literally save a buyer tens of thousands of dollars! This gives you leverage to stick to your asking price or maybe achieve even a little more. But that's another story...

Here's an example that I encourage you to follow:
In 2009, I sent to you an MLS listing. The home of your dreams had just come to the market for $500,000. Interest rates were at 5.6%, which at the time sounded like a very enticing rate. You put your offer in of $450,000 and they turned you down. So you decided to wait. The home did not sell and was recently reduced to $479,000. Ah, but now interest rates have come down to 4.6%. You lucky dog.

At 5.6%, your $356,250 loan (maximum amount in Lee county) would've cost you more than $380,000 in interest. With a full point lower interest rate you're looking at saving around $78,785 over the life of your loan! So you excitedly put in your offer, and this time they gladly accept.


Kelly Reark, Licensed REALTOR in the State of Florida
Gasparilla Properties, Inc., Boca Grande
Some information supplied by RIS Media.

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