Who are FHA loans good for? We’re examining this issue to help clear up some myths and misconceptions about the FHA loan program including the notion that FHA loans are only intended for first-time home buyers (FHA loans are available to all financially qualified borrowers) and the idea that FHA mortgages have an income limit that prevents those with greater incomes from applying (not true).
Who Are FHA Loans Good For?
FHA loans are good for both first time buyers and those who have returned to house-hunting after owning property. For second-time house hunters (and beyond) the most important thing to remember is that FHA loans have an occupancy requirement and you can only purchase a primary residence with an FHA loan. No timeshares, vacation homes, or other “occasional occupancy” purchases are allowed.
FHA Loans For Those Planning Ahead Financially
Certain FHA loan options may have an appeal to those thinking long-term. Do you want to purchase a smaller home with a plan to buy a larger one sometime in the future? Some FHA loan options such as an adjustable rate mortgage (which may feature a more competitive introductory interest rate than you might otherwise find) could play an important part in that financial planning. Some borrowers buy with refinancing squarely in mind-if you are thinking of this, consider that FHA loans allow an FHA-to-FHA refinance option known as an FHA Streamline Refinance which can result in lower payments, a lower rate, or both.
Others may wish to refinance in order to pay for improvements to the property including energy efficient upgrades. There are plenty of options in this area including add-ons to your refinance loan for approved energy saving devices or features. Talk to a participating lender to see which FHA loan options might be the right fit for your long term financial goals.
FHA Loans For New Construction
Can’t find just the right property? Are you looking for a home loan that allows you to build a house from the ground up? Participating FHA lenders often work with borrowers in just this way with construction loans that allow for the purchase of property and construction costs of the new house. There have been improvements to construction loans that some lenders offer today-ask your loan officer about an FHA One-Time Close construction loan.
Lenders who offer this one-time close option provide big advantages (in the form of streamlined lending procedures and an elimination of the old “two loans” construction loan issue) to the borrower looking for a loan on a proposed construction home. There may be additional requirements (including escrow) for this type of mortgage. Talk to your participating lender to learn more.
FHA Loans For Multi-Unit Properties
Those who want to consider becoming a landlord are free to purchase multi-unit property with an FHA mortgage, as we pointed out in our previous blog post. However, the borrower must be an owner occupier, and if you’re interested in discussing using potential rental income to help you qualify for an FHA loan, you’ll need to discuss that with your loan officer to see what is possible based on your prior experience in that area.
FHA Loans For Those Who Need Low Down Payment Requirements
Conventional mortgages can require as much as 10% down, where borrowers with qualifying FICO scores may be able to put as little as 3.5% down for an FHA mortgage. Low down payments are a huge advantage to the first-time home buyer or new couple looking for a home. Credit history and FICO scores will play an important part in the down payment and interest requirements for your specific loan.