FHA Provides First Time Homebuyers Easy Access to New Homes With Very Little Down
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 given to home buyers by a family member.For years conventional loans have been the most popular option for first time homebuyers.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.FHA loans are insured by the government, and the credit requirements are more relaxed than conventional loans.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.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. This money can be used to cover closing costs, prepaid items, or you can use the money to buy the rate down.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 has been growing in popularity among the first time home buying market. To find out more about how to qualify for an FHA home loan, visit http://www.timmarose.com
Tags: 2-1 buydown, conventional loan, credit, down payment, FHA, fha first time, fha home loan, fha requirements, first time home buyer, hvcc, seller concessions