With the mortgage and real estate industry going through so many changes, buyers are confused about the programs available and what the criteria is. I wanted to write this blog to give everyone who needs it, a little education about FHA mortgages.
Many buyers know enough to get by about FHA mortgages. However, many still think that FHA is just for first time homebuyers. If this is what you believed, read on....
Although, FHA is the original "first time homebuyer program", FHA is not just for first time homebuyers anymore. FHA mortgages are worth looking at regardless of whether you have owned a home before or not. FHA mortgages are worth reviewing regardless of whether you have money for a down payment or not.
Here are just some as a consumer may want to look into FHA financing:
- FHA has increased their lending limits in most counties across the country. This will make it a more attractive program for some buyers who are purchasing slightly higher priced homes.
- FHA will still allow buyers with credit scores below 620 to finance a home if they qualify. FHA will even finance buyers who credit scores are below 580. Typically, your credit score should be 530 or above for most lenders to feel comfortable. If you had extenuating circumstances which caused you to fall behind on your credit obligations, and you can document them, then the underwriters will look at the whole picture while reviewing your loan for approval.
- Many buyers qualify just fine for a mortgage. (Let's face it , with rent getting more and more expensive- many renters are actually paying the equivalent of a mortgage payment. ) However, the element they are missing is the funds for closing. FHA allows for assistance with your funds for closing. They allow for a gift from a non-profit organization (also know as downpayment assistance programs), grants, and gifts from family members. Your loan officer will be able to assist you with determining which of these best fits your financial needs. (please note: you definitely want a loan officer well experienced with FHA mortgages)
- Buyers with NO CREDIT SCORE can benefit from this program. You will need to have approximately 4 non-traditional lines of credit. By non-traditional lines of credit, I mean anything you have paid on a monthly basis, consecutively for the most recent 12 months. (i.e cellphone, car insurance, utility companies, lay a way, child care, any company that you have done paid on a monthly basis).
- FHA rates are comparable to Conventional rates. If your credit score is below 660 and you are putting less than 5% into your initial purchase, FHA rates will be better than rates on Conventional financing.
- FHA does require that your taxes and insurance are paid each month with your monthly payment.
- Did you know that if you are not a U.S citizen and are eligible to legally be in the United States, that you can get an FHA mortgage? You can. Contact your favorite loan officer for details.
- Do you have money to put down but have some credit issues? Try FHA!
FHA's goal is now and has ALWAYS been to help potential borrowers get into homes and keep them.
I have been in the mortgage business for 18+ years and FHA is still my favorite loan option for buyers. It just makes good sense to me. It saddens me to think of the number of people who would have qualifed for FHA financing but were put on Subprime loans.
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