If you are searching for your first home, the Federal Housing Administration (FHA) might be able to help you with that task. Read on to find out why FHA loans are of such benefit to first-time buyers and what it takes to qualify for a loan.
How the FHA Makes It Easy for Buyers
First-time buyers are more likely to need special handling in mortgage matters, and that is where FHA loans shine. Take a look at just a few of the major bonuses these loans offer:
- Low Down Payments – While a conventional loan can set you back by about 20% down, FHA loans can be had for little as 3.5% down. FHA loans allow the down payment to be provided from family members as a gift.
- Low Credit Score, No Problem – Most conventional lenders frown on scores below around 700, but FHA-approved lenders only require that you have a score of 580 or above. If your score is lower than 580, fear not. If you can come up with a bit more of a down payment (10%, to be exact), you might be approved for a loan with a credit score between 500 and 579.
- Loans Are Assumable – It pays to plan ahead, and when you get ready to move up to another home, your FHA loan will be assumable. That makes things easier and quicker for the next buyer.
Doing Your Part to Qualify for an FHA Loan
In addition to the credit score and down payment requirements, you must also show you are a good credit risk by doing the following things:
- Be a US citizen, be of minimum age to enter into a contract, and have a Social Security number.
- Be willing to remain in the home. In other words, don't rent the home to others.
- Show that you have been employed at the same job or in the same general field for at least two years.
- Have the property appraised by an approved professional home appraiser. The guidelines for FHA loans are somewhat more stringent than that of conventional loans when it comes to the condition of the property, so the seller should agree to make any needed repairs or improvements.
- Show that you are at least two years out of bankruptcy and three years out of a home foreclosure. In addition to the passage of time, you must also show that your use of credit has improved substantially since those damaging events occurred.
Speak to a home loans provider to learn more.