6 Reasons FHA Loans Work Well for First Time Home Buyers
FHA loans have many benefits for all home buyers.
But they really seem to work well for first time home buyers in particular. A lot of first home buying stories center around the FHA process. While the FHA loan isn't tailored specifically for the first time buyer, it does seem to work out that way often. So, why is that?
Here's a list of 6 reasons why
FHA loans work so well for that first house.
1. Low down payment requirement. The required amount for a down payment on an FHA loan is 3.5% of the purchase price. So if you're buying a $100,000 home, you'll need a cash reserve of $3,500. Conventional mortgages can sometimes require 20% down. Imagine needing to save up $20,000 for your first home. This is probably the biggest reason many first homes are financed through FHA.
2. Your down payment can be a gift. Whether it's from your parents or your bridal registry, you can use a gift for your down payment. Other mortgage loan options do not allow gifts for down payments.
3. Sellers can contribute up 6% of the sale price to help cover closing costs.
4. More forgiving with credit and credit scores numbers. FHA permits only two years after Bankruptcies and three years after Foreclosures. You don't need perfect credit - but you do need decent a credit score and a recent positive credit history.
5. FHA only requires Health and Safety repairs as a condition of the loans approval. FHA also has a 203k Rehab loan that allows you to complete those repairs if the seller is unwilling or unable to make them. The 203k Rehab loan also allows you to remodel kitchens, baths or the entire home. Room additions are also permitted to make a home meet the needs of your family or lifestyle.
6. FHA loans have some features not found on other loans. FHA loans are assumable, allow non occupying cosigners and Streamline Refinancing with limited income verification.
Now, FHA loans are not the only option for the first time home buyer. In fact, for some buyers they may not be the best option. The best thing for you to do is talk to mortgage consultant about your options, and the best fit for your home buying situation.