Now that home prices have leveled in many parts of the country, many first time homebuyers are looking for creative ways to move into the home of their dreams. FHA, the Federal Housing Administration, is making it easier for many to purchase with low down payment requirements.This allowed many first time homebuyers to take advantage of the ,000 tax credit that expires at the end of the year.How does FHA make home buying so attractive?
For starters, you can finance a new home with very little down. 3.5% of the purchase price to be exact.WIth a FHA loan, you can get into your new home with just 3.5% down compared to at least 10% with a conventional loan.5% down, and it doesn’t even have to be your own money.The money can be given to home buyers by a family member. Conventional loans for years have been the staple for purchasing new homes.80/20 financing and 100% loans were common for first time homebuyers. Now, expect to pay anywhere from 10 to 20 percent down to get a conventional loan, and above 80% is going to require Private Mortgage Insurance.
FHA also allows first time home buyers the opportunity to purchase when conventional lenders issue a denial.FHA loans are insured by the government, and the credit requirements are more relaxed than conventional loans.Most lenders will require a 680 Fico score to qualify for a conventional loan. For a FHA purchase, the minimum credit score required by most lenders is 620. Although some lenders will work with scores down to 580, expect your lender to require a middle score of 620 before you are issued a pre-appvoal letter.
FHA is a very strong option for purchases. Although 3.3.5% down payment is required, however, 100% of this down payment can be gifted to the home buyer. What this means is that you can have your down payment gifted from a family member, and walk into your home without having to put any of your own money down.
Up to 6% of the purchase price can be in the form a seller concession. Conventional loans limit the seller credit to 3%, while you can go as high as 6% through FHA.The concession can cover prepaid items, closing costs such as lender fees and points.The 2-1 buydown is a great way for first time homebuyers to take advantage of the seller concession. By taking advantage of this concession, buyers can get an interest rate 2% below market in the first year, and 1% below market the second.
You can also expect the appraisal process to be a little smoother with FHA compared to a conventional appraisal. With a conventional loan, lenders are required to order an appraisal through a panel, a process known as the Home Valuation Code of Conduct.
FHA has been around since 1934, and now represents almost 50% of the purchase market.FHA is growing in popularity among first time home buyers. To find out more about how to qualify for an FHA home loan, visit http://www.timmarose.com
