Dispelling Homebuyer Myths on FHA Loans in Phoenix

Today’s the start of the NCAA basketball tournament and I can’t wait to see Arizona State … wait, that’s the NIT tonight because the tournament committee is a bunch of ninnies.

With a trip to Tempe, two escrows to open and a buyer to meet as well as Purim tonight, this seemed like a great time for a guest post. And Shailesh Ghimire, the Arizona Mortgage Guru, was more than happy to step in. Enjoy!

 As part of the economic stimulus package HUD increased the loan amounts under its FHA loan program. This is good news for home buyers in Maricopa and Pinal Counties. The new loan limits for these two counties are as follows:

  • Two-Family is now $443,250 (was $296,390) = $146,890 increase
  • Three-Family is now $535,800 (was $360,100) = $175,700 increase
  • Four-Family is now $665,850 (was $415,500) = $250,350 increase

With a very strong inventory of homes under this loan limit, the days when you couldn’t really buy much with a FHA loan are gone. The increased loan limit opens up the program to a wider selection of home prices and meets a the needs of a great proportion of home buyers.

In fact the FHA loan program works for a lot more borrowers than commonly perceived. Let me dispel a few myths people have about FHA loans:

1. Income limit – There is no income limit to qualify for a home under the FHA loan program. In the past the loan limit has been substantially lower than conventional loans. Because of this many have assumed that the program is suitable for only low to moderate income buyers. This is simply not the case.

2. Only For First Time Home Buyers – You do not need to be a first time home buyer to qualify for the FHA loan. The myth exists due to the same reason why some think there is an income limit.

3. Purchases Only – While it is common to use the program for purchases, FHA allows refinances as well. In fact the FHA program is great for refinancing from a current subprime mortgage.

The best part of the FHA loan program is how it allows the borrower to obtain down payment assistance. Technically, the loan is limited to 97% of the value of the home being purchased. The borrower is required to put 3% down. However, the guidelines allow the buyer to obtain this 3% from non profits as AmeriDream, Nehemiah etc, as long as the seller agrees.

Additionally, the seller is allowed to contribute another 3% towards closing costs. Also be aware that the FHA program can be used in conjunction with the Home in Five (bond program), which provides up to 5% down payment assistance.

So, for a home buyer this could mean purchasing a home with no money out of pocket. Not a bad deal in today’s credit crunch.

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

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