April 15, 2020
FHA home loans and refinance loans are complex, and the less you know about how the process works, the harder it can be to make sense of your loan. What you don’t know about home loans can make a big difference in the price you pay, the terms you accept, and more.
FHA Loans: Credit Checks Are Very Important
Credit counts. How much do you want to pay in interest and money up front for the down payment? Your credit score affects the cost of your loan.
How can you get financially ready for your home loan application? Do not begin the FHA loan application process with fewer than 12 months of on-time payments. You should make on-time, every time payments on all financial obligations with no late or missed payments for at least a full 12 months before applying.
Down Payment Options
FICO scores and credit history play a direct role in the amount of your minimum required down payment requirements, but typically FHA mortgage loans require only 3.5% down based on the adjusted value of the property. You may find conventional loans requiring a much higher down payment-as much as 20% depending on circumstances.
FHA loans permit down payment assistance from family members, employers, even local agencies. The FHA itself does not provide down payment help, but if you know of a down payment grant in your local area it may meet FHA loan requirements. If so, you should definitely apply for any down payment grant open to you.
Interest Rates
Interest rates and other details are things the buyer and lender will negotiate. The only FHA requirement is that interest rates charged on FHA mortgages be “reasonable and customary” as compared to similar loan products available to the borrower (based on the applicant’s financial qualifications).
FHA loans allow the purchase of discount points that can lower the cost of the mortgage; this is part of the negotiation of the loan–you can choose to pay points or not.
Remember, FHA does not set or regulate interest rates on FHA single-family mortgages.
FHA Loan Facts: These Loans Are Not Just For First Time Home Buyers Only
FHA loan programs do not favor first time buyers or provide an advantage to first time home buyers.
Your participating lender might offer special incentives from that financial institution for the first time borrower, but the FHA loan program itself welcomes all qualified borrowers regardless of status as borrowers.
Even if you currently own a home, you can apply for an FHA mortgage–as long as you understand that you must occupy the home purchased with the FHA loan. FHA mortgages are for owner/occupiers.
Refinance loans for FHA borrowers can include the refinance of non-FHA loans into a fixed-rate FHA mortgage.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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