Michael Holigan: Chris and Sherry Patton were worried about a home loan. They didn't have that much money for a down payment. Qualifying for a conventional loan would have been a problem, but not one from the Federal Housing Administration.
Chris Patton: Basically, I think it all revolved down to down payment. Had just a lower down payment than what the conventional offered.
Sherry Patton: And with us happening to be first time homebuyers, we wanted to get in with as little as we could, you know, to be able to afford a new home.
M.H.: The FHA loan requires less of a down payment, as little as 2 1/2%. It doesn't require cash reserves, and it allows your family to help out with a gift for down payments and closing costs. Another great feature of an FHA loan is a larger debt ratio than most conventional loans. Say your monthly income is $3,000 a month. The FHA uses 29% for the front ratio, meaning you can afford $870 per month for house payments. On the back end, the ratio is 41%. That's $1,230 for house payments and reoccurring debt. There are very few disadvantages to the FHA loan. How much you can borrow is capped. Housing and Urban Development sets a limit based on the average sales price in an area. Mortgage insurance is higher than conventional loans and there's more paper work since the government is involved. The Patton's are pleased with their FHA loan and don't think the red tape was that big of a deal.
S.P.: Just buying a house altogether, I mean, was a huge experience. And like anything else we've ever done before. But, no, the paper work really wasn't...I mean, we've been told we'd have to be in there for like 2 « to 3 hours and we were out in an hour and a half.
M.H.: If it weren't for the FHA, millions of people wouldn't qualify for a loan. It even allows for the builder or the seller to pay some closing costs and some discount points. If you need a loan with less money up front, the FHA loan may be the right type for you.
Find out how much home you can afford - it's FREE!
Episode 34 1996 - 97 Season
| Brush to Lush | Mineral Spirit Cleaner | Wall and Attic Insulation | Landscape Software | Studs and Trusses | Ceiling Fan Switch | FHA Loans |