VA and FHA loans have been a huge part of the Solano County real estate market for many decades.
VA has been an amazing loan program for active duty and veterans since the 2008 crash. VA has modernized its loan program over the past 14 years by increasing the loan limits and updating some old guidelines.
When I first moved here, the veteran was not allowed to pay any discount points and the rate was set by VA, which made the discount points a moving target and tricky for Realtors. That silly rule went away many years ago and now the only difference between a conventional and VA loan is that a termite report and clearance is required, which is usually no big deal unless the property is loaded with pests and dry rot.
FHA remains a very important option for people working hard to move into the middle class and achieve the American Dream, but unlike VA, FHA is not achieving its mission of making homeownership accessible and affordable. For some reason, unlike private mortgage insurance, or PMI, the FHA mortgage insurance premiums, or MIP, cost is not risk based.
An FHA buyer with a 625 FICO score pays the exact same MIP rate as a buyer with a 740 FICO score and what makes it even worse, the buyer is stuck with the monthly MIP for the life of the loan. The cost of the FHA non-refundable MIP is 1.75% up front and .85% with 3.5% down and .80% with 5% down annually, which is substantially higher than PMI.
Let me give you folks an idea of how…
