First Time Home Buyer Basics: FHA Mortgage Benefits & Considerations (Video)
In the second part of a series on first-time homeownership called First Time Home Buyer Basics, Deliea Roebuck and the Sweethome VA Real Estate Team explore First Time Home Buyer Basics: FHA Mortgage Benefits & Considerations. If you missed part one, you can read it hereFor over 80 years, the federally backed Federal Housing Administration (FHA) insured mortgage has helped first-time homebuyers achieve the American dream of home ownership. First-time home buyers don’t get the loan from the FHA - in fact, you need to search for the best interest rates and terms on your own. The FHA insures the first-time homebuyer’s mortgage, making it possible for lenders to offer a more favorable loan package.[note color="#ffcc00"]Fill out the first time home buyer's survey below and Deliea will help you get started on your journey to homeownership.[/note]Read on for a broad look at the upside and possible pitfalls of the “granddaddy” of homebuyer products, the FHA Loan, which is categorized by:
- Low down payments
- Low closing costs
- Easy credit qualifying
| Feature | Upside | Precaution |
| Low Down Payment - can you afford monthly payments, but not the downpayment? | FHA requires 3.5% down instead of the traditional 20% | Higher closing costs from additional fees not found in traditional loans (in the thousands of dollars). A mortgage insurance premium is applied to closing costs |
| FICO Score Threshold - You don't have to have a great or perfect credit score to get an FHA mortgage. You may even qualify if you’ve been through bankruptcy | Lower credit requirements - FICO scores can be lower than the typical 700 | Overlays ~ lender discretion may put additional requirements due to the higher risk.FHA loans carry monthly mortgage insurance premiums (in the hundreds of dollars) |
| Assumable Rate | A buyer can inheret the rate, which makes an attractive resale | |
| Gifted Money | Can get money from non-traditional lending sources, like family members to qualify | |
| Refinance | Once 20% equity is reached, you can refinance to take advantage of even lower rates that may apply | FICO limit mortgage insurance is now a permanent part of the loan and can’t be removed, even once 20% equity median sales price is reached |