Is Now the Right Time for an FHA Mortgage?
For first-time home buyers this is good news, but it’s also helpful for anyone looking to buy or refinance a home. FHA home loans feature 3.5% minimum down payments (compare that to your favorite conventional lender’s down payment requirements), allow seller contributions to closing costs, and permits down payment assistance from approved sources.
What this means for the average house hunter is that the money saved for down payments and closing costs may go farther than anticipated, and for the seller it means working harder to make a home more attractive in the home’s present condition to borrowers who may have other sellers competing hard for the sale.
Housing may be more affordable at the moment, and housing trends are cyclical. So how can a borrower take advantage of this part of the housing cycle?
The first step is to evaluate where you are at in your journey toward home ownership. If you are not yet ready to begin house hunting and are still planning, budgeting, and saving, don’t allow current economic headlines rush you into a decision you may not be financially ready to make. Yes, the housing market’s trends are cyclical, but no, you do not have to act right this second or risk missing out on the sale of the century.
Home buying is a major investment and the process should never be rushed.
For those who ARE ready, remember that you can use certain aspects of the FHA home loan program to your advantage when negotiating a sale. For example, the seller is able to contribute up to six percent of the sale price of the property toward your closing costs (never the down payment).
If your seller is asking a bit too much for the home, you can use that six percent potential contribution as a bargaining chip-some buyers will agree to the sale price IF the seller is willing to contribute toward closing costs. This is a strategy you should consider, but also think about what you will do if the seller does not agree to the plan.
It is always a very good idea to get pre-approved for a home loan at the start of the house hunting process or as soon as you can once you begin. Sellers will take you more seriously and you will have started the conversation with a lender regarding how much home loan you should realistically expect to afford.
Home loans are a major investment, it’s true, but with some planning and research you can find the best deal possible for your financial needs and goals.
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