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Why FHA? 10 Good Reasons...

By W. Todd Galde

If you have 20% down, great credit, and solid income than a Conventional mortgage is most likely the way to go... but... what if you don't have the best credit or down payment or you have too much debt? You may have to find an alternative. FHA mortgages exhibit some unique qualities which set them apart from Conventional loans and have the flexibility to get approved where otherwise you might not. Here are 10 good reasons to consider FHA over a Conventional loan with Fannie Mae or Freddie Mac:

  • Maximum Financing without all the extra requirements: While the Agencies (Fannie and Freddie) allow for up to 97% LTV (vs 96.5% on FHA), loan-to-values exceeding 95% on Conventional may have extra restrictions, such as First-Time Homebuyer, or Income limits.
  • Lowest FICO scores... down to 550!
  • Payoff seasoned subordinate liens (12 months old) as Rate and Term (no "cash out" hits)
  • 85% maximum loan-to-value on Cash-Out Refinances
  • Use Non-Occupant Co-Borrowers to help qualify
  • Got Commission Income? It may be used as effective income if you earned the income for at least one year in the same or similar line of work
  • Streamline Refinance without an appraisal or credit qualifying
  • Had a Foreclosure or Short Sale? FHA allows for only three years seasoning (or less!) on major derogatory credit events like
  • No Maximum debt-to-income ratios – If the Automated Underwriting System says YES, than you are good!
  • Rates and Rebate: FHA loans are generally at least 0.50% better than Conventional when comparing par (no points) rates and the rebates, or credits, on the "back end" allow us to cover all or nearly all of the closing costs!


As you can see, if you're in a bind and you don't want to lose out on your dream home, FHA financing may be a great solution for you. And, we can refinance you out of the FHA loan in the future!

Advising smart financing for you and your family,

Todd Galde