After the highly publicized mortgage meltdown this past year, it should come as no surprise that 100% financing is a thing of the past.  However, first time homebuyers and others who are “strapped for cash,” still have other options.  The biggest dog in the fight for 100% financing is the FHA loan. 

The Federal Housing Authority (FHA), insures private loans that require a low down payment.  The FHA does not actually make loans, rather they help lenders by insuring loans and reducing the lenders risk.  An FHA insured loan typically requires a 3% down payment.  However, the great thing about an FHA loan is that the seller can contribute that down payment in the form of a “gift.”  This means that a home buyer can still get into a home with virtually no money out of pocket.  Given the right scenario, a buyers closing costs and down payment can be contributed by the seller leaving the buyer with little to no expenses at closing. 

Those are the great features about an FHA loan, however there are some points that you should be aware of.  First, you will be required to pay Private Mortgage Insurance (PMI), both as an upfront cost (built into closing costs) and as part of your monthly payment.  Also, because this is a federally insured loan you will have more stringent documentation needed as part of the loan and contract process.  It is important that you are working with a GREAT lender when you are obtaining any type of mortgage, but especially when working with FHA. 

Please note that the above information is NOT intended as mortgage or legal advice.  Consult a competant mortgage consultant for more information about FHA and other types of mortgages.  An excellent mortgage consultant in our area is Kevin Martini.  Feel free to contact Kevin or myself for more information regarding your next home purchase.

Best Regards,

Brian P. Hourigan

The Hourigan Real Estate Team