FHA loans and first-time homebuyers

___

Published Date 8/14/2018

Question: Are FHA loans only for first-time home buyers?

Not at all. The Federal Housing Administration was formed in 1934 to provide financing for low- and moderate-income buyers, but there is no maximum income for buyers or requirement that they are first-time buyers.

FHA has become a useful choice for many buyers whose credit situation might make conventional financing more difficult and more expensive.

FHA loans today require a minimum down payment and mortgage insurance for the life of the loan. Although it is not a first-time buyer program, it is very popular with these buyers, partly because many communities offer down payment and closing cost assistance for qualified first-timers, whose income falls beneath certain limits.

FHA is also an excellent choice for those buyers whose credit scores are at the lower end of the scale. Whereas conventional loans require a minimum FICO score of 620, FHA accepts scores much lower. Contact your lender for specific terms or to apply for an FHA loan.

FHA does have a potential disadvantage, and that is the way mortgage insurance (MI) is handled. Lenders require mortgage insurance to limit their risk any time the loan is for more than 80% of the property’s value. With a conventional loan, a borrower can ask the lender to remove the MI once they can demonstrate that the loan is less than 80% of the property’s value. With FHA, the mortgage insurance will be in place for the life of the loan. Borrowers pay MI in two ways: there is an up-front premium that’s added to the loan and a monthly premium that is also added to the payment.

FHA loan calculations can be a little tricky to explain in this medium so you should absolutely reach out to a trusted, licensed lender to better understand or apply for an FHA loan.

Good Luck!

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

American Home Lending USA, LLC - NMLS ID: 71983. To verify licensing, visit NMLS Consumer Access (www.nmlsconsumeraccess.org). Equal Housing Lender.