FHA LOANS FOR FIRST TIME HOME BUYERS
Find Out if You Qualify
What is an FHA Loan?
An FHA loan is a loan backed by the Federal Housing Administration which is an agency under jurisdiction of the Department of Housing and Urban Development. This government backed loan allows you to buy a home with less strict requirements and insured by the FHA.
This program allows first time home buyers to purchase a home with as little as 3.5% down payment. This is a great program to take advantage of for first time buyers short of down payment funds to buy their first home.
How to qualify as a first-time buyer under FHA loan guidelines?
The FHA loan requirements for approval are the following:
1. At least 580 FICO score with a 3.5% down payment
2. If your FICO score is between 500-579, then 10% is required for down payment
3. Mortgage insurance premium is required
4. Your debt-to-income ratio must be less than 43%
5. The borrower must be using the home as primary residence
6. Borrower must have stable income and employment, 2 years minimum
Does FHA mean first time home buyer?
The Federal Housing Administration (FHA) provides valuable benefits qualifying as a first-time home buyer. These programs include low down payment options, low interest rates, low closing costs, and if you have a lower credit score then lower loan amounts are available for conventional (non-FHA) loans.
What is the difference between FHA and first-time homebuyer?
With regards to conventional loans, the FHA allows for lower credit scores versus traditional conventional loans and are easier to qualify for. Generally, conventional loans allow lower down payments. Conventional mortgages are not insured by the FHA, whereas FHA loans are insured by the Administration.
What is the minimum down payment for FHA first time buyers?
Assuming the borrower qualifies, the minimum down payment for FHA is 3.5% of the purchase price of the primary residence. If credit score is lower than a FICO of 580, then 10% is required as down payment.
Are there any downsides to FHA loans?
The main downside to FHA loans is mortgage insurance is required. If the borrower puts a down payment of 20%, then there is no mortgage insurance which is nice.
What makes me a first-time home buyer?
According to the FHA, a first-time homebuyer is someone who has not owned a primary residence within the last 3 years from the time a purchase was made. As well, an individual and or their spouse who has never owned a home is considered a first-time home buyer.
How much can you be approved for as a first-time buyer?
If you’re buying an existing home, the maximum loan amount will be $600,000 or less. If you’re buying a new home or new construction home the maximum loan amount goes up to $750,000.
Can I buy a home with no money down?
Typically, to qualify for a no down payment home purchase lenders require a minimum of 620 FICO score. A good way to help your credit in the event you’re not at a 620 FICO is to pay down any high credit card balances to 20% of the limit of that card. For example, if you owe $5,000 on a credit card and limit is $6,000 then it’s recommended to pay down $4,000 of your debt so your balance is $1,000. This will result in your balance to limit ratio decreasing to less than 20%. You take the amount you owe versus the limit on the card and divide into it. In this case, $1,000 divided into $6,000 is 16%. You’re in great shape at that point and will optimize the increase in points on your FICO score. Another method to improve your credit score is by adding a new trade line, apply for a new credit card this usually improves your FICO score as well.
Which is the best loan for first-time homebuyer
The best loan for a first-time homebuyer is FHA. This is an excellent solution because it allows for low up front closing costs, minimal down payment as low as 3.5% and flexibility on your FICO score requirement unlike traditional conventional mortgages.
Can closing costs be rolled into or included into the purchase of home?
The FHA is flexible allowing up to 6% of the closing costs to be covered by the seller based on the purchase price of the home. The fees that can be included are title, escrow, homeowners’ insurance, and lenders fees.
Ways to get money for the down payment of your loan:
1. Save 20% of your paycheck every month
2. Save your tax refund
3. Set aside periodic savings
4. You can borrow money from your parents
5. Sellers sometimes credit back closing costs to close deal
6. Government programs offer grants that you can qualify for
7. Check your 401K guidelines to see if you can borrow against it
Does a first-time homebuyer need a down payment?
First-time homebuyers that qualify can apply for a no down payment mortgage. This allows first time home buyers and repeat homebuyers to purchase a home with zero money down except any standard closing costs.
Does section 8 help with purchasing for a first-time buyer?
Most people don’t know is that section 8 can help low-income borrowers to purchase a home. Traditionally, section 8 is known for helping low-income family’s assistance with rentals. Under section 8, a portion of a families rent is paid through the Housing Choice Voucher Program.
Rent to own, why is that bad for buyers?
Renting to own a home presents a lot of risk to first-time homebuyers. The first risk is if the owner of the home gets foreclosed on then you will be forced to move out. The home will be foreclosed on by the bank and now you will have to buy it back from the bank usually all cash. You should strongly consider getting approved for a home loan even if you have bad credit on your own versus doing rent to own. The other risk is property values may go down and you might be bound by a contract to purchase at a higher price.
Questions? Chat with our representatives today! We love to answer questions and help our client’s get prequalified today!