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.
For those who rent their homes, paying a landlord every month can begin to feel like wasting money that could be used on owning their own home. If you have dreamed of being a homeowner, but have financial issues that make you wary of applying for a mortgage, you should know about a government sponsored loan program for people just like you. The Federal Housing Administration (FHA) has been providing a means of home ownership for many people who would otherwise not qualify for a conventional loan for many years. To learn how the FHA loan program could put you on the path to being a homeowner, read on for 10 surprising facts.
1. Even if your credit has suffered dings and has plummeted due to financial issues, the FHA loan program has a loan option for you. For those with scores of at least 580 you can be approved with a down payment of just 3.5%. Even if your score is as low as 500, don't despair; you may still be approved if you can provide a 10% down payment.
2. Financial problems can mean bankruptcy for some, so the FHA loan program understands and accommodates filers if they are at least two years past their filing date. Be ready to prove that you have learned how to use credit wisely since you're filing with a good credit report showing no past due bills or late payments.
3. Along with the bankruptcy acceptance comes a provision for those with foreclosures in their past. Your foreclosure must have been at least three years ago, however.
4. Though some standards are lower than conventional loans, you must still show steady employment (in the same job or at least the same field of work) for at least two years.
5. The approving bank will take a look at your debt to income ratio, with the FHA requiring that your total, new loan payment (including insurance and property taxes) be less than 43% of your total monthly debt.
6. Because the down payment amounts are so low, the FHA requires that you purchase mortgage insurance to help defray the risk to the lender. Commonly the 1.75% fee is either "rolled into" your monthly payment or paid upfront at the closing.
7. FHA loans have a limit on total amounts financed and this amount varies depending on debt-to-income ratio, area of the country and your credit history.
8. The FHA requires that your new property pass an inspection and appraisal, which verifies that the loan amount is commiserate with the actual value of the property.
9. You may hear the term "guaranteed" in regard to government sponsored loans, such as FHA and VA loans. Don't be misled about this term; it does not mean that your loan is guaranteed to be approved. The guarantee is from the FHA to the lender. Since loans that are guaranteed are more likely to be approved by the lending institution, you will reap a major benefit of a government sponsored loan.
10. When it comes time to sell your home, another benefit of having an FHA mortgage becomes apparent. FHA loans are assumable, which can mean an easy and fast loan qualification for buyers interested in your home. This perk can add to the attractiveness of your home for buyers.
Contact a mortgage lender like McKinley Mortgage for more information about how FHA loans can help you achieve the dream of home ownership.