FHA just released their new loan limits for Northern Illinois and the Chicago area. This determines the maximum loan for FHA financing in Cook County, Dupage County, Kane County, Lake County, Will County and McHenry County. The limits are:
1 unit $410,000
2 unit $524,850
3 unit $634,450
4 unit $788,450
This is great news. As underwriting for conventional loans has become progressively tighter, FHA is shaping up to be a great alternative. Some of the advantages of FHA financing include:
3% down payment required – the down payment can come from a gift from a relative or as a grant from a down payment assistance program, so the buyer can come in with no money out of their own pockets.
FHA allows a seller concession of up to 6% – this allows more creative ways to structure your purchase, including ways to buy with no down payment or closing costs, or using this concession to lower your interest rate.
FHA is not credit score based – this means you can qualify for an FHA mortgage with credit scores in the upper 500s – without any price hits. With low down payment conventional mortgages the rates go up if your FICO score is below 680. FHA uses a common sense underwriting approach. It understands that credit problems can happen to anyone. Their concern is that the problem has been addressed and isn’t likely to occur again.
FHA is more lenient with past bankruptcies – you can buy a home 2 years after a Chapter 7, and 1 year after a Chapter 13 bankruptcy. If the bankruptcy is medically related or due to actions beyond your control, you can buy sooner.
FHA pricing is as competitive as conventional financing – the pricing on FHA is on par with any conventional program, and much lower if you are buying with a low down payment or if your credit scores aren’t the best.
These are just a few of the advantages of FHA financing. When I first got into this business, a long, long time ago, FHA was the preferred program for first time home buyers or others who didn’t have a lot of money available for a down payment. FHA lost favor over the years as more low down payment conventional options came on the market. It was hard to do an FHA here in Dupage county and other parts of the Chicago area when the max loan limit didn’t keep up with the increase in housing prices. FHA has worked toward modernizing their underwriting over the years, and it is now much more streamlined and user friendly. For many home buyers FHA is now the best loan alternative, by far.