Joe Wilson's Silicon Valley Real Estate Blog

Like any business, the things you deal with every day become familiar to the point that you sometimes forget that not everyone knows what you know. I was reminded of this twice this past weekend when people asked me about the real estate market and the issue of financing came up.  I mentioned that I've done two deals this year representing Buyers who only put 3.5% down and was met with shock and amazement. 

The media has the general public convinced that you can only buy a home with a big (20% or more) down payment these days, That may be true for conventional loans but they fail to mention the increasingly popular FHA loan programs now available. FHA loans which were common in the rest of the country but not in high-prices California, are now available to home buyers for loans up to $729,750! But the best thing about FHA loans is that you can put down as little as 3.5% down on a home. Of course you have to have a reasonable credit score and be able to document sufficient income to qualify for the loan, but these loan programs have become increasingly popular, particularly among first-time buyers who usually have limited cash for a down payment. There are some additional costs associated with FHA loans though. Mortgage insurance (PMI) is charged to the homeowner each month at the rate of 0.5 percent per year. FHA also charges an upfront mortgage insurance premium of 1.5 percent, so your closing costs will be higher than with a conventional loan.

If you haven't heard about FHA loans and want more information, shoot me an email and I'll get you up to speed fast. With mortgage rates now at 50 year lows, there's little reason to keep putting off buying your first home. Now you know what I know!