First-Time Home Buyer Program

If it is that special time where you are considering purchasing your very first home, there are a few important tips that you should know before taking the leap! Many people, especially millennials, find it difficult to find enough funds to buy their first home. However, there is a wonderful solution to help raise the monetary means to obtain your first home. Many people do not realize that the federal government will give you an amazing loan option known as the Federal Housing Administration loan.

What is a Federal Housing Administration loan?

The FHA has been around since 1934. It is a mortgage loan that is offered for first time home buyers that offers extremely low down payments, very low closing costs and has easy credit qualifications. The down payment for the FHA loans can be as low as 3.5%. This offer isn’t restricted to a single unit either. If you have the means you are able to use it on properties of with up to 4 units!  The only other personal requirements for an FHA Loan is proof of employment and a steady income.  There is a home appraisal required of the home, and this must be handled by an FHA-approved appraiser.

Qualifying for an FHA Loan

Many people worry that their loan application will be denied because they have low credit and are struggling to raise their scores.  FHA loan requirements are more lenient than other comparable loans.  The main determining factor of the FHA loan requirements is the down payment.  To receive a down payment that can go as low as 3.5%, you must have a credit score of at least 580.  For any score above 500 and below 580, the down payment for the loan must be at least 10%.  Those with credit scores lower than 500 are considered ineligible for an FHA loan.  But don’t fret, the FHA does make some allowances, based on circumstance, so it’s worth getting in touch with the FHA even if you currently don’t meet the 500 score requirement.  The final requirements to keep in mind is you must be out of bankruptcy at least two years, and you cannot have any foreclosure in the previous three years.  You must also be current with all student loan payments and income taxes.

Additional FHA Loan Information

You may be able to get closing costs covered when you take out an FHA loan.  The FHA allows sellers, builders, and lenders to pay for some or all of the borrower’s closing costs.  While this will typically raise the interest rates for the loan but can be a significant portion (3 to 5%) of the total loan amount.  Another important fact to note is that the FHA itself is not a lender.  Your loan will come from an FHA approved lender.  These lenders can have different rates and costs for the same loan, so you should make an effort to compare the rates of the various lenders.