Plan Ahead for Your FHA Mortgage Loan
Finding the home of your dreams can be challenging, but preparing for the process makes the entire experience less stressful.
FHA Home Loan Advice: Early Planning Is Best
Start saving immediately for the down payment since this is one of the biggest expenses related to your new home loan. The down payment is a significant part of the cash you will be required to have to close the loan, but there are other expenses to think about:
- The FHA Up-Front Mortgage Insurance Premium (UFMIP) is an expense that can be financed into the loan in its’ entirety or paid fully in cash at closing time. Financing the UFMIP means increasing your monthly mortgage payment, but discuss how much your monthly bill will go up with the lender.
- Home inspection fees are optional, but you should never skip the home inspection. Without it, you won’t know the true condition of the home you want to buy with an FHA mortgage. Buying a home with no inspection is like buying a car without test driving it.
- Appraisal fees are a required expense-the FHA loan transaction cannot move forward without an appraisal to establish the fair market value of the home. The appraisal should never be mistaken for a home inspection-the appraisal is a lender tool rather than a consumer tool.
For some borrowers that is not an issue. For others it may be a financial detail something worth considering, especially if one of the goals is to keep your monthly financial obligation as low as possible.
Home Loan Advice: Look at Your Credit Reports NOW
The moment you realize you want to be a homeowner, you should get copies of your credit reports from Experian, TransUnion, and Equifax. These credit reporting agencies are required by law to provide you with one free report per year, per agency.
You need to start reviewing your credit reports as soon as possible so that any corrections to either your credit score (via using better credit habits or for contesting inaccurate data in your credit report as the result of identity fraud, erroneous data, other problems) will take more time to correct than most people think.
Home Loan Budgeting and the Type of Mortgage You Seek
Some home loans may cost more than others. Buying an existing construction home may not be as pricey as purchasing a fixer-upper or having a home built from scratch.
If you need to have your home built from the ground up with an FHA One-Time Close Construction Loan, for example, you may need additional funds for expenses unique to such a construction project including architectural plans, an energy consultant (where FHA Energy Efficient Mortgages are used) and other issues.
Some want to buy or refinance a home to repair or remodel using an FHA 203(k) rehab loan.
Will this project require additional funds for inspections, pest control, or asbestos abatement? Additionally, One Time Close construction loans and similar types of mortgages may include a higher lender-required credit score range than a new purchase home for existing construction, mobile homes, etc.
Discuss your home loan needs with a loan officer to learn what the best type of mortgage might be for you based on your financial needs and goals.
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