Buying a home can be a somewhat daunting experience for the first time home buyer. Not knowing where to start or what to expect can create many sleepless nights for the prospective homeowner. To make the search for the perfect home less stressful, and more enjoyable, it is best to find out what type of financing you will qualify for, and the loan amount that will fit into your budget.
In today's market, an FHA purchase loan can be an excellent option for those who are buying for the first time, as well as those who do not have a perfect credit rating. FHA purchase loans are also a great option for those who have little money to use as a downpayment. FHA loans were designed to facilitate home ownership in the United States, and are easier to qualify for than a conventional loan.
Here are a few reasons that make FHA loans a great option for many home buyers.
FHA Loans Require a Smaller Downpayment
Generally an FHA purchase loan only requires the buyer to make a down payment of three percent of the purchase price. This three percent down payment can be gifted to the buyer, or it may come from a non-profit charitable organization. There are also FHA down payment assistance programs that the buyer may qualify for. This allows the buyer to get into the home with very little out of pocket expense.
Eligibility Is Not Solely Based on Credit Rating
Eligibility for an FHA loan is based on a total score card. They take into consideration job history, payment history on current obligations, and debt to income ratios, in addition to credit rating. Perfect credit is not necessary in order to be able to qualify for an FHA loan. Those who do not have well established credit may still be eligible. This makes it easier for those who are just starting out, and have not fully established their credit.
FHA Loans Allow for a Non-Occupant Co-Signer
FHA loans will allow a non-occupant co-signer to be included on the loan in order to assist the buyer in qualifying. This is a huge benefit for those who have just graduated from college and expect their income to increase once they begin working in their field of study.
FHA Is an Excellent Option in Today's MarketFHA loans already have a low down payment requirement which provides a great option for those with little money to put down. Due to the current mortgage crisis, recent legislation has been passed which temporarily lowered FHA's down payment requirement from three percent to 1.5%. This means people can get into a home with an even smaller down payment. This legislation also temporarily increased the FHA mortgage limits in counties all across the country, which will allow home buyers to obtain a larger mortgage than previously allowed. These changes in FHA guidelines are only temporary, so now is a better time than ever to explore the option of using an FHA loan to purchase a home.
While there are downsides to every type of loan, FHA loans have many benefits and it is definitely worthwhile for the prospective homeowner to educate themselves on the different aspects of FHA financing. Working with an FHA approved lender to discuss the pros and cons of FHA financing can prove to turn the daunting task of buying a home, into one which is rather enjoyable.
