How can the FHA home loan program help first-time home buyers? Some perks of an FHA mortgage are central to the home loan program itself, while others may be offered by lenders as an incentive to use that financial institution for your FHA home loan.
FHA Home Loans For First-Time Buyers: Low Down Payments
The FHA home loan program requires only 3.5% minimum for borrowers with qualifying FICO scores. FHA loan requirements say FICO scores as low as 580 can technically qualify for the lowest down payment, but you will need to check with a participating lender to see what standards may apply above the FHA minimums.
Those with credit scores lower than 580 may still technically qualify for an FHA mortgage loan but at a higher down payment.
FHA Home Loans For First-Time Borrowers: Lender Perks
One reason it pays to shop around for an FHA mortgage lender? Finding one that may offer you some kind of benefit for being a first-time buyer. Not all lenders do this, but if you can find one that does you may get an advantage that can help you financially. Lender perks will vary depending on state law and other variables.
One area important to do some homework on when searching for a lender is locating any local down payment assistance programs in your area. By law, the lender cannot provide down payment assistance to the borrower, but a local or state agency may be able to do so if the assistance meets FHA loan standards.
FHA Loan Facts You Should Know
The FHA itself does not lend money. Participating lenders who meet FHA requirements will, and the terms and conditions for FHA loans may vary from lender to lender. You will want to shop around for a lender offering more favorable interest rates, down payment requirements, closing costs, etc.
Your participating FHA lender may or may not offer the specific type of FHA mortgage you seek. Some lenders choose not to offer certain kinds of loans even though they are technically eligible to do so.
For example, FHA loan rules permit the use of an FHA One-Time Close Construction Mortgage for multi-unit homes, but some lenders will only approve these types of construction loans for single-unit properties.
Some FHA lenders may choose not to offer condo loans or mobile home loans, depending on demand and other variables.