Credit Not Perfect? FHA may be the Answer.
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 $8,000 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.Exactly 3.5% of the purchase price. Unlike a conventional loan which requires at least 10% down with exceptional credit, first time homebuyers can get the keys to a new home with just 3.with 3.5% down, and it does not have to be your money. The money can be gifted to you by a family member. Conventional loans for years have been the staple for purchasing new homes. 100% financing and 80/20 loans were common place 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. Because FHA loans are insured by the Federal Government, the loans are a bit more leniant on credit standards. For most conventional loans, a 680 credit score is required, with otherwise flawless credit.A 620 credit score will be required by most lenders for an FHA home loan.A 620 Credit score will be required by most lenders but some select lenders can go as low as 580.
FHA is a very strong option for purchases. Although 3.100% of the 3.5% down payment requirement can be gifted.This means you can have your down payment gifted by a family member, and own your home putting 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.The growing popularity is not surprising among first time homebuyers. To find out more about how to qualify for an FHA home loan, visit http://www.timmarose.com