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.It has become a little easier to purchase a home because of the Federal Housing Administration, or FHA.This helps home buyers enjoy the current ,000 tax credit being offered through 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. 3.5% of the purchase price to be exact.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 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.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.A 620 credit score will be required by most lenders for an FHA home loan. Although some lenders will work with scores down to 580, expect your lender to require a middle score of 620 before you are issued a pre-appvoal letter.
FHA is a very strong option for purchases. Although 3.3.5% down payment is required, however, 100% of this down payment can be gifted to the home buyer. 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.A great way to take advantage of the seller concession is through the 2-1 buydown. 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.A conventional loan requires that the appraisal is ordered through the home valuation code of conduct, while FHA can be ordered directly by the broker or lender.
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
