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FHA Loans for First Time Home Buyers

Buying a home is a big step in your life, and it involves a number of things including a commitment to your future, a solid financial situation, and more. New house buyers are often the ones who find it most difficult to buy a home, often due to things like their credit score, smaller down payments, or a lower income level than others buying homes. However, numerous programs can help. FHA loans for first time home buyers are available, and can offer you the help that you need as a first time homeowner. In most cases, FHA loan requirements are more favorable and more realistic for many people beginning the process of buying a home.

FHA loans are insured by the Federal Housing Administration a division of HUD, and have been making home ownership possible for Americans since they were first introduced in 1934. The government doesn't actually provide you the loan – instead, you'll use a lender who offers a loan to you that is backed by the FHA. These have become one of the best options for first time home buyers, for several reasons.

  • The first reason stands out tremendously. FHA guidelines only require only a minimal down-payment in order to qualify for the loan. In many instances you can secure a mortgage with only 3.5% down. That means that if you buy a home that costs $150,000, you only need to have $5,250 for a down payment. This makes it much easier to come up with the down payment.
  • However, it's worth noting that based on your credit score you could need to come up with 10%. If your score is below 580, this will likely be the case. Still, that's a big difference from other options out there.
  • While the credit score you have may drive up your down payment requirement, it doesn't eliminate you from getting a loan like most traditional mortgage, where a credit score of less than 640 will hurt your chances of securing a loan. This program allows FHA loans for people with bad credit. FHA offer is known for offering flexible standards with credit, which means that instead of having to stress about being able to qualify for a loan you'll still probably be able to get the loan you want – you just might have to have more money down to offset the added risk for the lender.
  • Additionally, the closing costs are usually much lower when you take out an FHA mortgage. You can reduce closing costs which will in turn lower the amount of out-of-pocket cash you have to pay for your house.
  • Many FHA home loans also help you get the 'fixer uppers' on the market that are an even better deal. You can often add repair and remodel costs into your loan.
  • Finally, most FHA mortgages are also more available for those with lower incomes. They're designed to help those who actually need help getting a loan, and as a result they're more accessible.
  • FHA is one of the only financing programs offering loans for manufactured homes.

In short, there are lots of different reasons that FHA has become one of the most popular loan types for first time home buyers. If you're in the market for your first home, you should take a minute to see if these loans are right for you. See, 9 Tools for First Time Home Buyers

Why FHA Is Great for New Home Buyers

Securing a home loan is the key step in being able to purchase the home of your dreams and settle into your life there. But for many, the process of finding and qualifying for that loan can be difficult. Things like high down payments and strict credit score requirements make it hard for many new home buyers to turn their dream of home ownership into a reality.

That's where FHA home loans can help. FHA is a government insured home loan program that was designed specifically for first time home buyers and home buyers with less than perfect credit scores. Since the Federal Housing Administration backs the loans, it's possible for lenders to offer easier to qualify for terms and conditions. It's worth taking a closer look at just why FHA loans are so great for new home buyers. Here are some of the primary reasons you should give it a look for yourself. Homeownership in the U.S. has soared since the Great Depression when the Federal government roller out FHA loans to assist new home buyers with fair financing opportunities for every applicant.

FHA Home Loans
  • Lower Credit Score Requirements – Credit scores have always been one of the biggest challenges to those buying their first home. Your credit score usually influences everything regarding your loan, including whether or not you can even qualify for it. But with FHA mortgages, you can qualify with a credit score as low as just 500. FHA offer second chance loans for home buying.
  • Small Down Payments – In traditional loans, it's common for borrowers to need a down payment of at least 20% the total price of the home. That's a large amount of money, and something that makes it harder for them to purchase their home. With FHA home loans, your down payment can be as little as 3.5% if you have a credit score of at least 580. Lower scores may require larger down payments of 10% - still less than the usual 20%.
  • Good Interest Rates – Interest rates on FHA insured loans can be much lower than those you would get with a traditional loan. The reason is simply that since a lower credit score brings more risk to lenders, they charge higher interest rates. But with a FHA home loan, the government insurance helps offset that risk and keep rates lower for you.
  • Low Fees – With FHA mortgages, fees in closing costs like appraisals, credit report fees, attorney costs, and more could be included in the loan or paid for by others. This means that you could get lower fees with an FHA loan than you would with traditional ones.
  • Small Monthly Payments – With lower interest rates and low fees, you can expect to pay less per month for your home. Your monthly payment will obviously vary depending on the specifics of your home and your loan, but lower monthly payments are common with loans insured by the FHA.
  • Funding for Home Rehabilitation – In many instances people buy a home that is considered a "fixed upper" and they need money to pay for repairs and renovation. Ask about the FHA 203K loan that enables people to borrow up to 115% of the purchase price.

Simply put, FHA home loans offer a very viable option for first time home buyers. If you're struggling to meet the stricter credit score requirements or find the money for a 20% down payment, looking into these government backed loans could be exactly what you need to turn your dream of owning a home into a reality for you and your family.


 

First Time Home Financing.com does not offer mortgages or direct financing. FirstTimeHomeFinancing.com is a website that offers information about house financing and does not guarantee 1st time home mortgage programs directly or indirectly through representatives or agents. FirstTimeHomeFinancing.com provides a news and information service by offering editorial content related to the housing and mortgage industry. This website has no official relationship with the Federal Housing Administration or the Department of Housing and Urban Development.

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