Do you know all your FHA home loan options?
There are important choices to make that can affect your monthly payments, the amount of down payment money you bring to the transaction, and even whether your home loan is a fixed rate mortgage or an adjustable rate loan.
FHA Home Loan Options: Down Payment Assistance
The FHA loan program itself does not offer down payment assistance, but permits contributions of gift funds and down payment help that meets FHA loan rules.
Third parties such as government agencies or charitable organizations may be able to help with your down payment if you meet the program’s requirements.
Gift funds can come from a relative or other third party but all funds for down payment must be carefully documented and verified by the lender.
FHA Home Loan Options: Adjustable Rate Mortgage Versus Fixed Rate Home Loan
FHA borrowers have the option to apply for a mortgage loan featuring an adjustable rate mortgage. The rate adjustments are regulated by rules in HUD 4000.1 as to the frequency and amount of change.
This type of mortgage is good for borrowers who are considering the purchase of a home but don’t plan to stay in the home for the entire duration of the loan, or who plan to refinance early in the loan (subject to seasoning period requirements and lender standards).
FHA Loan Options: Financing The Up-Front Mortgage Insurance Premium
FHA home loan borrowers are required to pay an Up-Front Mortgage Insurance Premium (UFMIP) for FHA home loans. This premium is considered part of the borrower’s cash required to close but NOT part of the required down payment.
Borrowers may finance all of the UFMIP or pay it in full up front. Those who choose to finance the UFMIP should know that doing so may raise the amount of the monthly mortgage payment but this can be a good way to reduce the amount of out-of-pocket costs of the loan up front.
FHA Loan Options: Get Pre-Approved First
You can fill out an online form to be put in touch with an FHA lender who can discuss your home loan needs and get you pre-approved so that you know the price range of home you will be eligible to purchase assuming the loan itself is approved.
Pre-approval helps the borrower be taken seriously by home sellers and can assess the borrower’s basic ability to afford the loan.
Pre-approval should not be confused with final loan approval, but it is an important tool in the early stages of your home loan journey.