Buying Your First Home With an FHA Mortgage
The National Association of Realtors notes that historically, approximately 40% of buyers year over year are purchasing for the first time. That’s an impressive number no matter what the current conditions of the mortgage industry might be.
Are you among those searching for a first home? Buying a home with an FHA mortgage puts first-time buyers in a better position to own a home thanks to lower down payment requirements--only 3.5% for those who financially qualify with FICO scores that meet both FHA and lender requirements.
The FHA minimum FICO score is 580 for the lowest down payment.
Lower down payments can help in unexpected ways. Spending less on your down payment means having more money to put toward closing costs. And you may be eligible, depending on circumstances, for down payment assistance programs in your local area.
These programs may be able to help you offset both the downpayment and closing costs (depending on the program) and it is a smart idea to explore those options if they are available to you.
Putting more down than required can be a good idea if your financial needs and goals support doing so. If you plan on keeping the home long-term, a bigger down payment may be to your advantage--lowering your principal balance can help lower your monthly payments.
Ask a loan officer about the benefits of doing so and while you are at it, why not ask about the importance of having BOTH a home appraisal and a home inspection? You will find there is a world of difference between the two.
A reliable mortgage professional will tell you that the appraisal is not intended to be as complete as a home inspection. The appraisal is not a consumer tool, it is intended to help the LENDER.
And what about the type of first home you want to buy? Depending on your needs you may need to search harder for a participating lender; some participating FHA lenders do not offer certain FHA mortgage options.
You may find variances in your housing market regarding FHA mobile home loans, for example, as well as some types of construction loans. Some FHA lenders may not offer the type of mortgage you seek but there is plenty of competition out there among FHA lenders--keep looking!
FHA loans are offered for mobile homes and manufactured homes, condo units, and you will find FHA rehab loans for fixer-uppers and properties that would not otherwise pass an FHA appraisal before the repair work is done.
Condo loans have requirements that are much different from mobile home loans; FHA construction loans will have different features than rehabilitation loans. Some of the differences between these programs are procedural, others may require you to save up for extra compliance inspection fees or other expenses.
Ask your participating lender if you aren’t sure what type of property you want to buy (condo, suburban home, mixed-use property) or whether you need a fixer-upper rather than a new construction home. The options you have may surprise you and it is a good idea to know all your options before committing to one or the other.
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing
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