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 helps home buyers enjoy the current ,000 tax credit being offered through the end of the year. 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. 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. 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. 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.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 3.100% 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 cover closing costs or any prepaid items such as setting up an escrow account for taxes and insurance. A very popular option is to use the money to take advantage of the 2-1 buydown feature. 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.The growing popularity among first time homebuyers has been incredible over the last few years. To find out more about how to qualify for an FHA home loan, visit http://www.timmarose.com
