An FHA loan comes with a variety of options including the types of property you can buy (suburban home, townhome, condo unit, manufactured home, etc.) and the types of mortgage you can apply for (15-year term, 30-year term, fixed rate, adjustable rate mortgage, etc.).
FHA Loan Fact: Applying For An FHA Mortgage With A Participating Lender
There are many participating FHA lenders waiting to help you, and while FHA loans are NOT available from a financial institution that does not participate, the number of those who do is quite high. If you need to refinance a conventional loan and your lender is not an FHA lender, you’re free to find one who does and refinance into an FHA mortgage.
FHA Loan Fiction: First Time Home Buyers Only?
FHA loan rules do not give precedence or an advantage to first time home buyers. Your participating lender may have a program from that financial institution which does, but the FHA loan program itself welcomes all qualified borrowers regardless of their status as first-time home owners or experienced buyers.
FHA Loan Fact: Lower Down Payments
While FICO scores and credit history may have an effect on the down payment requirements for some borrowers, typically FHA mortgage loans require 3.5% down based on the adjusted value of the property. You may find conventional loans requiring a much higher down payment.
FHA Loan Fiction: Interest Rates
The FHA does not set or regulate interest rates on FHA single family mortgages. That is an area where the buyer and lender will negotiate, and the only FHA requirement is that interest rates charged on FHA mortgages be “customary” compared to similar loan products available to the borrower based on his or her financial qualifications. FHA loans allow the borrower to purchase “points” that can lower the cost of the mortgage in the form of lower rates, and this is part of the negotiation of the loan if the borrower chooses to purchase or finance discount points (where permitted).
FHA Loan Facts: Credit History
Your FHA lender will definitely check your credit rating, FICO scores, and other qualifications to make sure you are a good credit risk. Go into the FHA loan application process with no fewer than 12 months of on-time payments on all financial obligations with no late or missed payments for best results.
Lenders have a difficult time approving loans where the borrower’s most recent 12 month history has “lates” and/or missed payments. However, if you can show that such incidents were circumstantial and not likely to occur again (be prepared to document this) your lender may be able to work with you, depending on the particulars. Talk to a loan officer to see what your best options are for an FHA loan or refinance loan.