Definition of Federal Housing Administration Loan:

FHA Loan limits in Orange County:

An FHA loan is a great alternative to a Fannie Mae or Freddie Mac conforming or high-cost mortgage. FHA loans are not made by the FHA but rather they are insured by the Federal Housing Administration; if the home-buyer isn’t able to re-pay the loan, the FHA will intervene and pay the lender for any losses they have incurred. Because of the government's insurance, an FHA loan requires only a 3.5% down payment, and is available to home-buyers with credit scores as low as 580. FHA loans are available from mortgage lenders, banks, mortgage bankers and brokers will offer different rates, terms and fees for FHA loans, so it's best to get Good Faith Estimates from a number of different places to find the best loan.

FHA loans have become very popular because of the low FICO score requirements and low down payment needs. To pay for FHA insurance, the buyer is charged an up-front 1.75% mortgage insurance premium (called MIP and it can be financed into the monthly mortgage payments), along with an insurance premium.

FHA Loan Qualifications

To qualify for a FHA loan, the home-buyer must be employed and have avoided bankruptcy for the past two years, and foreclosure for the past three years. A property purchased using an FHA loan must be appraised by an FHA-approved appraiser. The government also limits the size of FHA loans with the loan limit for Orange County, California is $729,750. Because the appraisal and underwriting process can be more involved than with conventional loans some sellers prefer not to work with buyers that are using FHA financing. In addition, some condo building homeowners associations aren't approved to consider borrowers with FHA financing due to an older law in the association's covenants, conditions and restrictions document that gives the association a "first right of refusal" that allows them to deny a prospective buyer. This law violates the Fair Housing Act established by the Department of Housing and Urban Development (HUD), the government agency that controls the FHA, which provides funding for FHA loans.


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