FHA Loans – Another Option For Buying A Home
FHA Loans – Another Option For Buying A Home
It is important to consider a number of options before financing a home. One of the most common options is to get a conventional mortgage, but don’t forget that there are other ways to finance this purchase that include a VA and USDA loan. These are very common options that afford buyers other ways to finance the purchase of a house when they do not have the ability to get a conventional mortgage.
If the plan is to obtain an FHA mortgage, it is useful to know about the benefits available with this loan and some special requirements that must be met to make the buying process go much more smoothly.
What Is FHA?
FHA is the short version of Federal Housing Administration which is a governmental organization helping to make it more affordable for people in Avon by the Sea and other locations. Although the FHA does not grant mortgages itself, it does back mortgage loans from lending institutions for higher risk buyers.
Buyers that can benefit from these services are those that may have lower than normal credit scores or are unable to come up with a comparable down payment to traditional mortgage home buyers. This does not mean that they are not capable of financing a home. It is still necessary for them to meet certain credit score and debt to income ratio requirements and they must have enough cash on hand to buy the house.
The Difference With FHA Loans
The difference with FHA loans is that they allow borrowers the opportunity to buy a home with only 3.5 percent down. The typical mortgage using a conventional loan requires 10 to 20 percent down payment. Furthermore, the down payment does not have to be from the buyers own funds and can be in the form of a gift from another person.
What this means is that buyers getting an FHA loans do not have to provide the money for the down payment themselves. The money can be from another person’s funds and buyers can have higher debt levels that are acceptable with traditional mortgages if they are capable of meeting FHA requirements. Traditionally, lenders will not give mortgages to buyers with credit scores above 580, but another option for buying a home is with FHA loans and can be obtained with credit scores over 580.
Can Every Home Qualify For Financing With FHA?
It is not possible for every home purchase to be finances with Federal Housing Authority backing. Acceptable homes must be in good shape, or if problems are found with them during the appraisal process, they must be repaired before closing the loan. This program does not allow mobile home financing or those within certain price points. They also disallow vacation homes and multi-unit houses.
Buyers should work with a real estate agent or lending professional to help them determine whether a house will pass the FHA guidelines. Working with these individuals will prevent buyers from being disappointed if they find a home they love but later find out they are not eligible.
Occupancy Requirements
There is an occupancy requirement with the FHA which states that borrowers must live in the home a minimum of one year. The primary reason for this is to discourage individuals wishing to flip homes to make a profit or those wishing to use them as rental properties from getting the loan. This is not a program designed for investment style buying.
For more information about pre-qualification and loan options to suit your needs, contact us at info@onestophomebuyersLLC.com.