Orange County, CA home buyers are finding that FHA financing is a great way to go when purchasing a home. Only a few years ago there were hundreds of different types of loan programs, many offering 100% financing (or higher) for low FICO score borrowers who didn’t need to show the lender much information beyond a few bank statements. But now, most, if not all, of those loan programs are gone. Home financing is very “vanilla”, meaning we are left with just a few different types of financing.
Different Type of Mortgage Financing Available for Orange County, CA Home Buyers
- Conventional Financing: This tends to mean mortgage financing underwritten to Fannie Mae and Freddie Mac guidelines. A few years ago, Fannie/Freddie offered 100% financing. Also, if someone wanted to purchase a home with 5% down, there were “80/15″ programs, where the 1st mortgage covered 80% of the purchase price and a 2nd mortgage covered 15% of the mortgage, leaving just a 5% down payment from the buyer. Now, high loan to value 2nd’s are no longer available. Also, in California, a buyer can’t even get mortgage insurance above 90% loan to value. And to get it at 90% they had better have perfect credit and low debt to income ratios. Realistically, at least in California, Conventional financing is for those buyers with 20% down payment or more.
- VA Financing: This is just about the last of of the 100% financing programs. The downside is the buyer needs to be eligible, typically by having served in the armed forces. For those that are eligible, VA financing is terrific. In 2009, the 100% financing loan limits were raised to $737,500 in Orange County and Los Angeles County. Even a purchase price above $737,500 will only require a slight down payment. Home buyers in Orange County and Los Angeles County can buy a beautiful home for that price.
- FHA Financing: FHA stands for Federal Housing Administration. FHA does not fund or “buy” loans, but they do insure loans that are underwritten to their specifications. It is important that the lender stay within the underwriting guidelines as written by FHA or the lender could end up with an uninsurable FHA loan, which isn’t good for the lender or the borrower.
- Private Financing: also sometimes known as “hard money”, this type of financing is more flexible in terms of underwriting guidelines, but also comes with high loan fees, interest rates, and low loan to values. Investors will quite often use this type of financing.
Isn’t FHA Just for First Time Buyers?
No! FHA is for Orange County move up buyers as well. As a matter of fact, with the fall in property values over the past few years, it is now very common, at least for home buyers in Orange County, to go with FHA even if they have a home they will sell prior to buying a new home. Move up buyers, who just a few years ago could have sold their home and had plenty of cash available for a big down payment, are finding that the fall in values has seriously put a dent in the amount they will now have available for a down payment after selling their home. But when they find that that can buy a home for $750,000 with only 3.5% down payment, they begin to see the advantage of an FHA loan.
Realistically, homebuyers with anything less than 20% down payment should seriously consider an FHA loan. And for that matter, if a buyer has a FICO score under 700, they should consider FHA even if they have a 20% down payment. FHA has low 30 years fixed rates, and even has a great refinance option (FHA Streamline refinancing with no appraisal) if rates drop.
FHA Reverse Mortgage in Orange County
In Orange County the HECM, or FHA Reverse Mortgage is also becoming very popular. As seniors are learning more about the program and the benefits it provides, this program is really picking up steam.
What is the First Step?
The first step in determining the best financing for your qualification is to talk with a lender or Loan Officer who is an expert with FHA financing. Have the loan officer prepare loan scenarios based on your goals and qualifications. From there, a home buyer should have a good idea of what they can qualify for. Every Orange County, CA home buyer should be PreApproved for a mortgage before searching for a home.
Authored by Tim Storm, an Orange County, CA Loan Officer – Please contact my office at Trust One Mortgage for more information about an Orange County, CA home loan. 877-786-4243 x 7.
Contact us for your Orange County FHA Mortgage:
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*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829
We are not the FHA, VA, USDA, HUD or any other government organization. The content on this blog is intended for information purposes only. 
FHA loans are a great way to go, this article really makes it clear as to the value of using a FHA loan to buy a lot of house. The fact is once the cap was increased to $737,500 and the median house priced has dropped to 500K in this market. The FHA loans has value.