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.The enabled many to get the ,000 tax credit currently in place for first time home buyers.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.First time homebuyers took advantage of 100% financing and many utilized 80/20 loans. 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. Because FHA loans are insured by the Federal Government, the loans are a bit more leniant on credit standards.Most conventional lenders are going to require a 680 middle credit score, in addition to great credit.FHA purchases will require a minimum credit score of 620.Most lenders will require a 620 Fico score for FHA, although a select few will allow scores down to 580.
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.This money can be used to cover lender fees, points, and any other closing costs.A great way to take advantage of the seller concession is through the 2-1 buydown.By using this seller concession, buyers can get an interest rate 2% below the normal rate.
You can also expect the appraisal process to be a little smoother with FHA compared to a conventional appraisal.FHA loans do not require that the appraisal be ordered through the newly formed home valuation code of conduct (HVCC) which has slowed the process down significantly.
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
