Purchasing a new home is exciting, especially if it’s your first time to do so. There’s something uniquely satisfying about being coming home each night, knowing you own the roof that’s over your head. The FHA first-time homebuyer loan program can make the process a lot easier to go through, allowing you to purchase your home at a lower cost and with fewer restrictions.
The federal government offers FHA first-time homebuyer loans and along with most states to increase the number of homeowners among the population. While they’re not for everyone, they do offer an attractive option for those seeking to buy their first home since they offer a low down payment, lower interest, fewer fees and the possibility to defer payments. These loans are offered to people who have not owned a home for three years or more, including single parents and displaced homemakers who previously owned a house alongside a spouse.
One the significant benefits is that the FHA insures lenders against potential default and requires a minimum credit score of 580 or above to acquire a loan. In most cases, the downpayment required for the home will be limited to 3.5% of the value of the house. However, in many cases, mortgage lenders will require a credit score of 620 or higher in order to approve the loan. You’ll also need to provide documentation of your income and available assets and meet the lender’s ration for debt-to-income, which is around 41% to 43% of monthly gross income going towards payments on all your revolving or installment debts.
The relatively low restrictions on these loans make them an ideal choice for the first-time homebuyer. Some of the pros for considering this option is that they’re great for those who don’t have enough money for a sizeable down payment. They cater to those with a limited ability to meet high-interest payments and fees, and they’re good options for those with a credit score too low to qualify for other types of loans. Even if you are able to afford a more substantial down payment, you may still want to look into the first-time homebuyer loan for the low-interest rates alone.
Downsides of the program include the fact that they generally have higher mortgage insurance requirements than other more conventional home loan options. These payments must be made over the entire life of the loan unless you are able to make a more substantial down payment as mentioned above.
There are also limitations to what type of home you can buy and where. The Federal Housing and Urban Development department limited the “national ceiling-loan limit” to $625,500 for most affluent areas. Loan limits are set based on the median income of an area, so depending on your ability to qualify may be limited by what type of house you want and where. A qualified mortgage lender can explain more about the pros and cons to you, but overall, an FHA first-time homebuyer loan is generally an excellent option for those looking to purchase that first home.
To learn more about the FHA first-time homebuyer loan, mortgage lenders or quality real estate agents who can help you find the home you’re looking for, contact our offices in Joplin, MO and let us know how we can help you. We’ve helped hundreds of people buy their first home and are confident we have a solution that’s right for your needs.