Nelson & Associates Realtors®… Call Today 608-438-5230 • Jon@jonnelson.com
Your Complete Guide to South Central Wisconsin Real Estate for Sale.
FHA Financing is a Great Choice for Many Home Buyers
FHA financing for Madison area homes and homes in Madison and Dane County may still be one of the best deals around if you have limited funds available for down payment. FHA financing is not really all that complicated but having a handle on the basics may just save you some time and energy.
With FHA Financing it’s All About Mortgage Insurance.
Typically when a home buyer wants to get a conventional 15- or 30-year fixed-rate mortgage they are going to be expected to have a 20% down payment or the lender will require the borrower to purchase Private Mortgage Insurance (PMI) to insure the lender against default. Private mortgage insurance is purchased from a non-government entity and the premium for the PMI is added to the borrower’s mortgage payment. To avoid PMI the borrower can put down 20% of the purchase price but that can be real chunk of change. Many potential Madison home buyers don’t have $50,000 lying around to put down on a $250,000 home. Financial institutions dealing with Madison area real estate typically have other loan products they can offer customers with less than 20%. But without the big down payment, most of these other programs are not the 15- or 30-year fixed-rate loans customers would really like to have to purchase Madison area homes–and they still require PMI.
Enter the FHA Financing Option
Madison FHA loans are made by participating banks and include 15- and 30-year fixed-rate programs. One of the major features of FHA financing is that it requires a much lower down payment, as low as 3.5%. This is lower than most other programs that are available through financial institutions. All FHA loans will have FHA lending limits that are determined for each county in each state. For example, in Wisconsin Dane county the FHA lending limit for Madison area homes in 2018 is $299,000 (this value changes periodically and can be different from county to county). If you have a 3.5% down payment, that means Madison homes with a purchase price of $309,845 are within the range. You can exceed this price if you can put down more than 3.5% in down payment. Also keep in mind that your buyer agent will be able to negotiate a list price down, typically by at least 3%. This would, again for example, let you comfortably look at homes up to approximately $319,000 and still be within striking distance of an FHA loan. The FHA has other eligibility criteria such as credit scores and debt-to-income ratios that you can review on the FHA website. Another significant feature of a FHA loan is that rather than requiring private mortgage insurance, the FHA provides the mortgage insurance on these loans. And, like other loan programs, this mortgage insurance is included in the borrower’s monthly payment, although with the FHA there is also an “up-front” mortgage insurance charge. You can get these details on their website.
The Advantage to the Borrower
What all this means to Madison area buyers is that even if you have a smaller down payment, maybe even too small to qualify for other bank products, and you meet the basic criteria for FHA financing in Dane county, you may not be “left out in the cold” so to speak. You may just qualify for FHA financing and it is well worth the time to check it out.
Nelson & Associates Will Help You Find Homes that are Within FHA Lending Limits
Nelson & Associates will help you get in touch with FHA lenders and simplify your search for homes that are within current Dane County FHA lending limits. FHA loans open the housing market to buyers who have more modest down payments on hand and who want to experience the joys of owning their own homes. Call me to day and we can get started right away.