What to Know about FHA Home Loans for First-Time Homeowners
What is a home loan?
But to know what FHA Home loans mean to homeowners, we have to start with the basics. What are home loans? FHA home loans are home loans that are easily applicable for and a great deal for many homeowners. They come from the FHA- Federal Housing Administration- approved lenders in order to help finance homes. They allow many homeowners to afford homes at fair rates, and prevents losses of the lender, making it ideal for both parties. Ideally, these loans are aimed to help first time or seasoned homeowners get fair loans and finance options.
Why an FHA?
But why take out an FHA loan? Why not take out a more conventional mortgage loan? In recent years, FHA home loans have seen a massive spike in popularity due to their very low restrictions for applicants. Unlike traditional mortgage loans, FHA mortgage loans are nearly accessible to almost everyone, due to the fact they do not require good credit or high FICO scores. Additionally, they also allow borrowers to borrow more than the actual purchase price, to allow them to make any needed repairs or replace any old or damaged furniture with something more modern or that better fits your personal style.
What does this mean?
Now, what does all this mean for first-time homeowners? What’s important to know? Firstly, let’s start with the golden rule of 12 months. For those applying for FHA home loans, especially for first time homeowners, it is important to ensure that all finances are being paid promptly (rent, mortgage, etc) and on time fora duration of 12 months including the month you apply for the loan. This builds a great track record for payments, and can help find a FHA loan, as well as loans outside the FHA. Not to mention, this can help build credit for those with poor or no credit.
Downpayments
Additionally, the amount of a down payment is at least 3.5% of the home value being purchased. Although, this may be raised in order to compensate for poor credit or nonexistent credit. This works well for most First Time owners who may or may not have good credit. In addition to this, this is a great option for many people who don’t have a great credit score already and by following the previous 12 month golden rule, it allows homeowners to begin to build a reputable credit score, which can be beneficial to lowering down payments or applying for different loans.
Citizenship requirements
Finally, and for many the most beneficial fact, is that it is not a requirement to be a U.S. Citizen to be approved for these loans, although applicants must be able to provide legal documentation of status. This allows anyone with legal residency status may apply and be eligible for these loans, making this an ideal loaning option for new families coming to find a new life, or those looking for their first homes. Previously, legal immigrants faced much steeper challenges to their loan applications. With the FHA, there are now more options for newcomers to get settled into their new home.
Conclusion
Altogether, FHA home loans are beneficial for homeowners, and especially those whose it’s their first time owning a home. They are insured through the Federal Housing Administration, to give ease of mind during the loaning process. Additionally, this insurance allows homeowners to pay smaller payments after their downpayment, in which can be as little as 3.5%. Not to mention, with these loans, they allow nearly anyone with good, bad , or nonexistent credit scores to be eligible for these loans. These FHA Home Loans are ideal because of their easy requirements and open accessibility to citizens and non citizens alike.