South Bay Homes and Real Estate

An Analysis of the FHA for Torrance Citizens

Has the idea of purchasing a Torrance home ever struck you? Does it seem within reach and affordable? With FHA home loans, many people are able receive the money necessary for home ownership.

What is the FHA?

An FHA loan gives the ability for a consumer to buy a property with a tiny down-payment of 3%, in contrast to many other types of loans which require a higher percentage.

With this loan program, first-time buyers without much extra money will also see benefits when searching Torrance homes for sale.

Realize that the FHA does not actually grant these loans; they insure them. If a buyer defaults on his loan, the lender will receive payment covered by the FHA. To receive an FHA loan, one must have a decent credit history, along with income comparable to the loan amount requested.

Read Also: Torrance California Mortgage for those that are credit challenged!

Can you Afford an FHA Loan?

To qualify for a loan through FHA, the cost of monthly payments cannot exceed 30% of the average total monthly household income.

Total costs also encompass property taxes, insurance, principal mortgage, and interest. These terms are grouped and referred to as PITI.

The following formula is used as an illustration of the concept. Monthly income times .29 is the maximum PITI.

If one’s income is $5,000, the max PITI is $1,450. The monthly payment, along with PITI and debt cannot reach 42% of gross monthly income.

Car loans and credit card balances are included in these terms.

Receiving a Loan Through FHA

To receive a loan, you must be able to make all monthly payments on time. You must also have the funds to place a down-payment on the property.

Additionally, you are responsible for closing costs. This will be around two to three percent of the home value. This down-payment covers: attorney fees, title search fee, homeowner’s insurance, and a Private Insurance Mortgage (if regular payments are 20% lower than the down-payment).

Basically, the FHA exists to assist those without a ton of resources or great credit histories in acquiring their own home.