August 18, 2023
First-time home buyers examining their FHA home loan options might wonder where to start when it is time to shop around for the right lender. Here are some important questions to ask when you compare banks and home loan options.
What Are My Home Buying Options? Approved Property Types
Are you looking for a unique type of home like a tiny house? If you seek an unusual property type you’ll need to see whether such a home is approved or acceptable to the lender.
Some financial institutions won’t issue loans on unconventional property types, others may have caveats to know before you agree.
In general, FHA mortgages are better for more conventional housing types such as condos, townhomes, and manufactured houses. You will have a better chance of finding a lender willing to offer an FHA mortgage on conventional housing.
Am I Ready For An FHA Application?
The lender will need to know your current FICO scores, credit repayment history, and other details to estimate how ready you might be to apply for the mortgage.
If the lender recommends a certain amount of time to prepare your credit, it’s smart to follow that advice even if you don’t select that financial institution in the end.
The reason to ask the lender this question? To understand how good the loan officer thinks your credit is now.
You can get the same results by filling out a pre-qualification form on a lender’s website, but some aren’t quite ready to do that but need the information anyway. Talking to a loan officer can help.
My Credit Isn’t As Good As I’d Like. Can I Make A Higher Down Payment To Compensate?
Worried about your credit going into the loan application process? Your lender may be willing to accept a higher down payment if your credit is otherwise acceptable to that financial institution. Ask the lender how making a larger down payment can help.
Can I Use Down Payment Assistance?
Does your state have an active down payment assistance program? In some cases, you might need the lender’s input on these programs.
Which ones are currently funded and active in your housing market? Your lender may have valuable insight to share.
Which Closing Costs Can I Finance?
Some of your closing costs may be financed into the FHA loan, but be sure to ask the lender how much doing so might increase your monthly mortgage payment.
Ask the lender how much you will save by paying those costs in cash and make your decision on financing them more about what makes the most financial sense for you.
If you plan to keep the home for a long time you might think twice about financing the closing costs because of how much that might cost over the loan term, but if you know you’ll sell eventually your decision-making has a different motivation.