FHA loans jump in popularity in Sonoma County
Janine Johnson became part of a surge of Sonoma County homebuyers who last year used FHA loans to purchase real estate.
“Rents were astronomically ridiculous,” said Johnson, who works as an accountant in Healdsburg. So in December 2014, she began looking at houses and in early 2015 bought a two-bedroom home on a quarter acre in Guerneville.
“My mortgage is much cheaper than any rent I would have paid for the same house,” she said. The FHA loan allowed her to make a smaller down payment, compared to the amount of money required by a conventional loan, and the home is working well for Johnson and her two dogs.
Last year, the number of single-family homebuyers in the county using FHA loans jumped 47 percent, according to multiple-listing data analyzed by Mike Kelly, a real estate agent with Keller Williams in Santa Rosa.
Their rise in popularity, due in part to a drop in the cost of mortgage insurance, meant that FHA loans were used to purchase one in every 10 homes sold in the county last year, or 530 properties. Such loans are insured by the Federal Housing Authority.
Most county home sales continue to be financed through conventional loans, which are mortgages eligible for purchase by the government-sponsored enterprises Fannie Mae and Freddie Mac.
Conventional loans were used in nearly six in 10 sales last year, according to Kelly, who has hosted a weekly radio show on Santa Rosa station KSRO for nearly two decades.
About a quarter of last year’s sales involved buyers who paid cash. The remainder of the transactions included a smattering of “VA” or veteran loans, adjustable rate loans, private financing from either sellers or from “hard money” lenders and sales where an investor is using IRS “exchange” rules to buy a house after having previously sold another investment property.
The FHA loans offer homebuyers such features as lower down payments and the ability to take on more debt than with a conventional loan. But because they allow borrowers to make a down payment of less than 20 percent, they also require borrowers to take out mortgage insurance, which increases their monthly payment.
While Johnson chose an FHA loan for the lower down payment, Manny and Jill Castrellon of Santa Rosa selected FHA because it allowed them to borrow more than they could with a conventional loan.
The couple sold a home and moved last year from Carson City, Nev., when Manny Castrellon transferred to become manager of the Les Schwab Tire Center in Rohnert Park. Jill Castrellon works as an office manager for G&C Auto Body in the same city.
Home prices here are nearly double what they are in Carson City, Manny Castrellon said. The equity from the sale of their earlier home meant they could meet the down payment requirements for a conventional loan. But they selected FHA financing because it allowed them to borrow more.
“We were able to buy a house big enough and keep it in the terms we needed with the family that we have,” said Manny Castrellon.
Last summer, the Castrellons and two children from their blended family moved into a four-bedroom, three-bath home on Ironstone Circle in southwest Santa Rosa.