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February
6

February 6th, 2018 by

Mansfield Buyers FHA Loans
Becoming a first-time home buyer comes with many challenges. As questions arise, our REALTORS® at Haring Realty can answer many of them for you. 

One of the first things you should do when shopping for Mansfield homes for sale is to get pre-approved for a mortgage. One type of mortgage you've probably heard about is an FHA loan. FHA loans were designed to promote homeownership by removing common obstacles from purchasing a home. This makes them very appealing to younger, first-time, and low-to-moderate income home buyers. Here's some of what you'll need to know if you're considering an FHA loan.

  1. How It Works
    FHA loans come from a private lender just like other mortgages. The FHA only insures the loan. Borrowers pay a mortgage insurance premium (MIP). A premium payment equal to 1.7% of your loan is due up front, the rest is paid as part of your monthly mortgage payment. If a borrower defaults on the mortgage, the FHA uses the money from those premiums to pay the lender. Providing this mortgage insurance allows the FHA to assume some of the risk that would normally be completely on the lender. In exchange for reducing their risk, lenders are required to offer lower down payment options, interest rates, and qualifying standards than they normally would. FHA loans must be provided by an FHA approved lender and the loans must meet FHA minimum standards.

  2. General Guidelines
    Approval for an FHA loan is not guaranteed, you still have to meet the lender's requirements. As with traditional mortgages, lenders offer different loans with different interest rates, so you will want to check with more than one lender. These are some of the guidelines.

    - A credit score over 500
    - A down payment of 10% for credit scores between 500 and 579. A down payment as low as 3.5% may be possible if your credit score is over 580.
    - Steady employment history. You must have been with your current employer for at least 2 years. Self-employed is okay too, but you will need to be able to verify your earnings.
    - Past bankruptcy or foreclosure won't necessarily disqualify you. You'll need to prove you're working toward re-establishing good credit.
    - You need to be current on federal student loans and income taxes.

    Provisions do exist for exceptions to these guidelines for buyers with shorter or non-traditional credit histories, or less time in self-employment. In these instances, you may still qualify, but the lender will likely need some additional proof you are able to pay back the loan.

  3. Other Advantages of FHA Loans

    - The down payment can come from savings, a gift, a grant from a down payment assistance program, or a combination of those sources.
    - Some of the closing costs can be paid by the seller, builder or lender. In some instances, closing costs can be financed as part of the loan.
    - FHA loans are assumable. Traditional mortgages generally aren't. This offers buyers peace of mind since they may be able to sell faster, easier, or at a higher asking price at some point in the future.
    - You can also borrow money for up to $35,000 in repairs if the home you're considering needs it.
    - You can pay off the loan at any time with no additional fee.

Whether you're looking for your first home or your next one, contact Haring Realty today. We can answer your questions and help you find the right home for you.

Categories: Buy a House

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