Top 10 Reasons to Purchase a Home Using FHA Financing!

There are numerous ways to finance your home purchase. Many new homeowners find that with changes in our market today one of the most cost effective ways to secure a mortgage is by using FHA (Federal Housing Administration) loans. Generally speaking these allow homeowners to purchase with little out of pocket. As of the beginning of October 2008 100% financing option programs became much more limited thus really pumping up attractiveness of FHA.

Before starting your search for homes in Beaverton, Portland or Lake Oswego talk with Norm Kremer at All Pacific Mortgage and to get fully understand your options. Reach him directly at (503) 997-5733.

1. Low 3% Downpayment

Downpayment can be a gift. The gift can come from parents or relatives. Sellers can pay buyer closing costs, therefore 3% (of total purchase price) out-of-pocket is all that's required.

2. No Prepayment Penalties

Some loans contain a sliding scale for early payoff (refinancing) of the original loan. Refinancing within the first year can be more costly than doing so two years down the road. Other programs even incorporate recapture costs if the property is sold within certain time periods (option ARM's). There is no penalty for refinancing or sale of an FHA financed home purchase.

3. Bankruptcy or Prior Foreclosure Allowed

Guidelines are more lenient and allow home buyers to have filed for bankruptcy within two years or foreclosure within the last three.

4. Lower Mortgage Insurance Rates

Mortgage insurance protects the bank against buyer default (not paying) and is required on almost any home purchase where buyer comes in with less than a 20% downpayment. Mortgage insurance is paid by the buyer as part of the monthly payment.

5. No Required Cash Reserves

Cash reserves are what lenders want to see sitting your bank account after buying a home. Some programs will require several month's worth of mortgage payment sitting there and available. Not so with FHA.

6. Up to 6% Seller Contribution

Seller contributions are when a seller pays all or a portion of the buyer's closing costs. This allows buyers to come in with only that 3% downpayment talked about above. Closing costs are part of any home purchase and amount to $1000's of dollars. Sellers can pay these on behalf of the buyer (reducing the seller's net proceeds from sale). Very common practice for first-time purchases.

7. Non-occupant Co-Borrowers

Single family residence financing is allowed to include an additional non-occupant borrower on the loan. For example; Buyer does not fully qualify for the payment under set guidelines. Another person can potentially be added to the loan but not reside in the house being purchased in order to meet income requirements.

8. No Risk Based Adjustment

Lower credit scores often equate to higher rates. No risk based adjustment means that as long credit scores are between 620 and 700 interest rate is going to be the same. Lower rate translates into more home for the money!

9. Not Affected by Declining Market Policy


10. No Cash-out Refinancing CLTV Restrictions

CLTV (Cumulative Loan to Value) restrictions are taken into consideration when pulling cash (equity) out of a property for most loan programs. Within the first 12 months of home ownership there are no CLTV restrictions for cash-out refinancing.


We hope these tips and definitions are of value to you. If there is any way we can be of service while searching homes for sale around Portland area neighborhoods please contact Dave.

Toll Free: (877) 629-5825

Dave Somerville, Your Portland & Lake Oswego Realtor: (503) 789-7633