After 10 years of marriage, I’m still enjoying living in the first home I moved into with my husband. Buying a first home can be one of the most exciting events in a person’s life. Before making this important expenditure, people need to first sit down and determine how they will successfully finance it. After all, a home will likely be the most expensive purchase you make in your life. Talk to a loan officer and determine how much money you can reasonably borrow. Then, decide how much money you want to use as a down payment. You also must decide how many years you will finance your home for. On this blog, you will learn about the process of buying a first home with a loan.
If you're in the market for a new home, you've probably seen the myriad of different financing available. Conventional loans are rather common, but there are some benefits to getting an FHA loan, which is a form of financing offered by the US government (Federal Housing Association). These loans provide home buyers with the option to get a mortgage with less money down and a lower interest rate. Before you opt for this type of loan, get the facts you'll need to make an informed decision.
Your Credit Score
Most lenders look at your credit history as well as your credit score, or FICO score. Most people looking for an FHA loan should have a minimum credit score of 580. For people with this score or a score up to 579, a ten percent down payment on the home is needed. For borrowers with a higher FICO score, they have the option of paying much less money down. Anyone with low credit scores is most likely not eligible for this type of mortgage, but ask your lending professional, such as Western Ohio Mortgage, for any help on applying.
When people buy a home, the seller will often offer to cover part or all of the closing costs. With an FHA loan, some of these costs can be paid including the home appraisal and title costs. Sometimes the interest rate on your mortgage will be a bit higher if the lender does agree to pay closing costs, so keep that in mind and decide if it's more financially viable to just pay them upfront and get a lower APR.
Not all banks offer FHA loans to their borrowers. Before you choose a company to submit your mortgage paperwork to, find out if they are FHA-approved. Then, do a comparison between the different lenders to find out what rates they offer. Just because a loan is FHA approved does not mean it has the same rate across the board, so do your homework. Take some time and find out what the total costs to you will be including paperwork filing and credit reporting.
If you choose an FHA loan, you must pay mortgage insurance. 1.7 percent of the home's total sale amount is due upon approval of your loan. The annual premium (paid monthly) also applies when it comes to mortgage insurance. This amount will vary depending on the amount of your loan, the home's loan-to-value amount, and the length of the loan (i.e. 30-year versus 15-year mortgage).