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Buying a Home or Condo Within FHA Loan Limits

August 27, 1989|WILLIAM MAHONEY

FHA loans are 30-year fixed-rate mortgages that are available to anyone with the income and credit needed to qualify. They are insured by the FHA and funded by approved banks, savings and loans, mortgage companies and other lending institutions.

To buy a home with an FHA loan, you must find a piece of property that is in the $101,250 range of the funding limit. It must qualify for FHA financing in terms of its condition and the relationship of the asking price to the appraised value.

If you are considering buying a condominium or townhouse, you can check with your agent or the homeowners association to see if the property is in an FHA-approved complex. Title companies will provide lists of such properties.

If you are seeking a single-family home, the property will have to be in suitable shape to pass the FHA inspection and be priced in line with the market value.

For the Record
Los Angeles Times Sunday September 3, 1989 Home Edition Real Estate Part 8 Page 2 Column 6 Real Estate Desk 1 inches; 29 words Type of Material: Correction
FHA financing--An Aug. 27 article on buying with FHA financing stated that the 1% origination fee can be added to the loan. However, the fee can only be added if it does not exceed the FHA's loan limit of $101,250.

Make sure you have the cash needed to close the purchase. Together with the down payment and the closing costs, it will cost you anywhere from about $5,000 to $8,000 in cash to buy a property close to the FHA limit.

Once you've saved the amount for closing costs and located the property, find a bank or lending institution that offers FHA loans by consulting with your agent, checking with a loan broker or turning to the telephone directory and making some calls.

With some FHA loans, depending on the type of property purchased, an up-front fee of as much as $4,000 will be charged for mortgage insurance, but that charge can be added to the amount of loan financed, as can the 1% origination fee charged for the loan. Both charges can be added on top of the maximum $101,250 loan amount.

With most FHA condo loans, the mortgage insurance is charged as a monthly fee of about $40.

Discount points may be charged by the lender and are paid by either the buyer or the seller in an FHA transaction. Usually, you'll have the option of taking a higher interest rate with no points or a lower rate with points. The length of time you plan to hold the property and the amount of cash available at closing usually determine which route is best for you.

FHA loans require tax impounds, which add about $105 to the monthly payment. Together with $889 a month for principal and interest on a 10%, fixed-rate loan, and $40 for mortgage insurance, the total monthly payment comes to about $1,034 for an FHA loan of $101,250.

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