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. What is FHA doing to make home buying so affordable?
For starters, you can finance a new home with very little down. 3.Exactly 3.5% of the purchase price.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 gifted to you 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.The Federal Government insures FHA loans, and because of the state of affairs with the housing market, the guidelines are a little less strict compared to conventional.Perfect credit and a 680 credit score is going to be required by most lenders for conventional loans. For a FHA purchase, the minimum credit score required by most lenders is 620.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. 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 be used to buy down the rate for the homebuyer, or cover any of the other closing costs.The 2-1 buydown is a great way for first time homebuyers to take advantage of the seller concession.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
