Federal Housing Administration, FHA Mortgage loans are perfect for First Time Home Buyers. FHA and the loans it offers were created to help increase the number of Americans who own their home.
One of the great benefits of an FHA loan is that they are very flexible in their approval criteria which allows for an easier qualification process than other Fannie Mae and Freddie Mac loan programs.
Remember this rule of thumb: if you are employed and have kept good credit history for the past 12 months prior to when you want to get the loan then you have a good shot at qualifying for an FHA home loan.
Benefits of getting a FHA Loan to buy a home
Low Down Payment and Closing Costs - One barrier for many people to buying a home is having enough money for closing costs and the down payment. FHA allows for less money to come out of your pocket.
* Less than 3% of Sales Price is required for down payment
* There are some 100% financing options
* You can get a gift from a family member for all of your down payment and closing costs
* The seller can give you a credit of a maximum of 6% of the sales price towards your closing costs and down payment. If you get this option, you still have to show that you have the required down payment money in the bank or as a gift (this is a huge benefit in a real estate buyer’s market like 2008)
Easier Credit Qualifying Guidelines – When it comes to getting a regular Freddie Mac or Fannie Mae mortgage, credit can be a huge stopping point for anyone who has had any type of credit problem within the past 24 months. FHA understands that people have things that come up and it believes that a bump in the credit road should not prevent you from owning a home. Here are some of the flexible guidelines from FHA about your credit.
* Most FHA lenders want to see FICO scores of 550 or higher to qualify you
* You can get an FHA loan if you do not have a credit score, but you have other credit accounts like a cell phone, utility bills, cable bill where you can prove your payment history for the past 6-12 months – you can prove your history with cancelled checks or with account printouts from the creditor for example
* You can qualify for an FHA mortgage 2 years after your Chapter 7 Bankruptcy Discharge, and while you are in Chapter 13 as long as you making your payments on time, and the trustee gives you permission
* You can qualify to get an FHA loan 3 years after a foreclosure.
Additional Features of FHA Loan Programs
* You can also buy a multi-family residential property that has up to 4 units if you plan to live in one of the units. You can use the rent income from the other units to help offset the cost of the mortgage payment when you qualify for the loan.
* You may only have one FHA loan at a time.
* There are special loan programs available if you are: a teacher, a law enforcement officer, buying a HUD repossessed home, a first time home buyer in California, buying a home that needs home improvements.
* You can also buy a home using the Nehemiah or Ameridream 100% gift financing option. If you can negotiate with the seller to give you 6% towards your closing costs and down payment then these programs turn some of that money into a gift which eliminates your need to have 3% of your own money in the bank to qualify. This is another great program for First Time Home Buyers.
If you are buying a home it is a good idea for you to speak with a loan officer who specializes in FHA loans. Knowing this information before you begin your home buying process with a real estate agent can save you a lot of time, energy and yes – money!
Article by Dale Stouffer. Dale has been a mortgage broker since 1996 and owns <a href="http://getprequalified.com">GetPreQualified.com</a>, a mortgage and real estate education portal dedicated to <a href="http://getprequalified.com/article_list_mortgage_first_time_home_buyer.php">FHA Loans, first time home buyer, buying a home, credit repair</a>.
