How Does First-Time Home Buyer Program Work?
You are about to embark upon one of the most fulfilling journeys of your life—home ownership. Though it’s a smart long-term move, you want to know for sure what you’re getting into. First of all, it is a big commitment and secondly, it’s a truckload of work.
Think about your budget: How much home can you afford?
A mortgage is not something to be taken lightly. To pay for your first home, you’ll need a good credit, a steady job and cash for a down payment.
A down payment is just one key part of the home buying process. In “conventional” mortgage, lenders typically require a 20-percent down payment. Anything less than that will require you to pay for a Private Mortgage Insurance (PMI) — and mind you, it is not cheap.
As a first-time home buyer, there are a lot of mortgage programs available that can make it easier for you to qualify for a loan. One of them is FHA, a mortgage insured by the Federal Housing Administration and the most common type of mortgage used by first-time buyers because of its low down payment and credit requirement.
Is It A Good Idea To Get An FHA Loan? Decide for yourself…
- Low Minimum Credit Score – 580 is the minimum required FICO score to qualify for an FHA loan. Below 580 will not necessarily exclude you from eligibility but you will need to put down a 10% down payment
- As little as 3.5% down payment – This means you can borrow up to 96.5% of the value of a home with an FHA loan
- Down payment can be a gift – Your down payment can be funded as a gift from someone provided that the gift and the giver meets certain FHA requirements
- Low interest rates – This will depend on how you stack up as a borrower and can play a part in getting you a low rate: excellent credit score, less than 35% debt to income ratio (ideally) and discount points at closing
- Higher debt-to-income ratios accepted – FHA limits are currently 31/43, though these can be higher under certain circumstances
FHA Loan Requirements: Do You Qualify?
- Legally residing in the US
- Of legal age
- With FHA approved lender
- With steady employment or have worked with the same employer for 2 years
- Self-employed individuals need 2 years of successful self-employment history
- Be able to pay the minimum 3.5% down payment with a 580 credit score or 10% down payment with a credit score of between 500-579
- Mortgage Insurance Premium (MIP) is required
- Debt-to-Income Ratio < 43%
Are you considering using an FHA loan to buy a home? While they may be great for first-time buyers, there are also other financing options available that you may find suitable for you and your family such as VA, USDA or other loans.
Take the time to educate yourself on the best home loan programs if you are looking to save money in the long run. At Synergy Real Estate, we can help answer all your questions and committed to finding the right loan for you.
Contact us for a FREE No Hassle Consultation today!
Helpful Links and Resources:
California Housing Finance Agency
Federal Finance Housing Agency