FHA Loans for First Time BuyersPosted by Steve Minino on Tuesday, February 19th, 2013 at 3:58pm.
If you're looking forward to buying your first home, but you're concerned about qualifying for a traditional home loan, you might want to consider applying for an FHA loan. The FHA, or Federal Housing Administration, has been offering mortgage insurance since the 1930s, and offers buyers a means of getting a mortgage that they might not otherwise be eligible for.
For first time buyers, often the greatest hurdle to getting a mortgage is having enough money to cover the down payment. One of the biggest benefits of getting an FHA loan is that the down payment can be as low as 3.5%. This puts home ownership within reach for a lot of buyers, particularly those in their twenties and thirties, who might not have much capital on-hand.
FHA loans are also a good option for first time buyers who have yet to build up much credit. The FHA allows relatives to co-sign for loans even if they won't be occupying the home themselves. Again, this makes home ownership accessible to a much wider range of buyers than traditional home loans.
Another financial benefit of obtaining an FHA-insured loan is that borrowers can get a large amount of their closing costs covered by the loan.
Firstly, not everyone will qualify. Requirements include a clean and stable credit history (no bankruptcies), and a steady job for the past two years that provides enough income to cover the loan. Borrowers will need to do their homework to find out which lenders in their area are FHA-approved, and then shop around for the best loan terms.
There are also limits to how much of a mortgage a buyer can get, and this varies by state. In some cases, the maximum loan amount may be 75% (or less) than what you could get with a regular home loan. This means that you might not be able to get the property that you really want.
Another potential downside is that FHA loans take longer to close than conventional loans, which means that you could miss out on the house you have your eye on if another buyer is able to close the deal more quickly.
There is also the issue with appraisal requirements, which are more strict with FHA loans. First time buyers and those with less income aren't likely to have the available funds to handle unexpected repairs, so the FHA has higher standards when it comes to appraisals. While this is done to protect buyers, these requirements may cause delays in closing or even cause an offer to be rejected by sellers who don't want to make the repairs.
While FHA loans may not be right for everyone, they can be the answer for many people looking to buy their first home. See our Related Links below for more information, and check out the FHA loan limits for Douglas County and Sarpy County in the widget below.
Steve Minino - Realtor, CRENHopkins Minino Home Team
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