FHA Loans: 

FHA loans have gained popularity over the past few years because they allow for more than the conventional Freddie Mac and Fannie Mae Option available in the market today.  The FHA loan option is great for first time homebuyers, but is not restricted to them.  You must occupy your home to use an FHA loan.

Here are some highlights:

• FHA loans are generally easier to qualify for than conventional loans, allowing for lower credit scores, higher "debt-to-income ratios", and low down payments (as low as 3.5% of the purchase price)
• Streamline refinance option available in the event that rates drop during the life of the loan. Allows for refinance without an appraisal.
• Higher loan limits available. Here are the 2012 loan limits for FHA loans in San Francisco, Contra Costa, Marin, Santa Clara, and Alameda counties: 

 

1 unit	$729,750
2 unit	$934,200
3 unit	$1,129,250
4 unit	$1,403,400

How does it work?

Contrary to what many believe, the FHA loan program is not a "government handout" and is not funded by the U.S. taxpayers.  FHA mortgages insure lenders against 100% of their losses in the event of a foreclosure. 

FHA mortgages are completely self-funded by two mortgage insurance premiums.  One that is paid upfront at-close (referred to as the "upfront mortgage insurance premium), and another that is paid on a monthly basis, commonly referred to as the "monthly MIP, or monthly mortgage insurance premium". 

Check out this sheet to show you what a typical FHA loan scenario would look like: