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The Facts About Popular FHA Loan Programs: An Interview with Scott Cooper of Cal Green Lending

By Scott Cooper

Tell us a little bit about your experience, company and the services you offer.

We are a family owned mortgage company, and have been in business since 1996. Our office is located in Calistoga, and we do business all over California, and occasionally in other states. We offer any and all types of financing available, including commercial, institutional, residential, construction/project, and unsecured personal loans, used for solar systems and remodels.

Can you briefly explain what an FHA home loan is?

Federal Housing Administration loans are insured by the Government, through the Department of Housing and Urban Development, AKA HUD. They offer the lowest down payment, outside of USDA and VA, and allow for credit scores as low as 500. FHA is essentially the last remaining 'subprime' lending solution in the marketplace, as they will lend to borrowers that cannot get conventional financing, due to lower income and credit scores.

Who should consider an FHA mortgage and how do people qualify?

I would only suggest FHA if a borrower is unable to qualify for Fannie Mae or Freddie Mac programs, as the Private Mortgage Insurance is extremely high, which is needed to cover the inevitable loan defaults. That being said, the interest rates are noticeably lower than FNMA, but are offset by the extremely high PMI. We can qualify up to a 54% debt ratio, compared to 45% from FNMA, which allows those with smaller incomes to qualify for higher loan amounts. Lower credit scores and higher debt ratio are a recipe for disaster, which is again why the PMI is so high.

What are the basics of the standard 3.5% down payment program?

The 3.50% down payment is calculated off of the purchase price of the new home. One of our lending partners only requires a .50% down payment, so a $300,000 purchase price would only require $1,500 down on this program. This gives us a huge advantage, and allows us to help many more people buy a new home who otherwise would not qualify.

When should people consider applying for the FHA 203k Streamline Rehabilitation home loan?

The 203k should only be considered by those borrowers who require an FHA loan in the first place, as there are other alternatives to access the funds for repairs and remodels. That being said, it is an excellent tool for capturing the funds needed to remodel a home during the purchase process. The streamlined 203k program gives access to $35,000 in repair/remodel funds, while the normal 203K allows for much higher loan amounts. Buyers should consider this program if the property they are purchasing or refinancing requires significant funds for improvement, as in $20,000 or more.

What are HUD-owned properties?

A HUD owned home is a property that has been foreclosed on, which was originally financed through the FHA program. HUD reimbursed the original lender, and then took direct ownership of the home. The main benefit of buying a HUD owned home is that they only require a $100 down payment, but the caveat is that only FHA financing can be used for the purchase.

What are the benefits and requirements of an Energy Efficient Mortgage?

EEM's are a great idea, but again are relegated to FHA programs only. They recognize the benefits of energy efficient improvements on properties, so allow for higher loan amounts and do not require the borrower to qualify for the extra funds. All the borrowers who meet the income and credit score requirements of the normal FHA program are eligible for an EEM to be added onto the loan amount. That being said, home buyers who qualify for conventional Fannie Mae have better alternatives, as we can access unsecured financing up to $100,000 which can be used for any repair/remodel, or energy effect upgrade, without the need to accept the expensive PMI of FHA programs.

What's the best way for people to contact you and/or your company

The best way to contact us is to give us a call at (707) 942-6300, or email us atscott@calgreenlending.com. They can also visit our website at www.calgreenlending.com for more information.

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