Let’s be honest—purchasing your first home can be a little scary. There are so many choices and things to think about that it’s easy to become overwhelmed. For example, which type of financing should you use? Many first-time buyers find it difficult to qualify for conventional loans, and while adjustable-rate mortgages are a great option, some buyers don’t want to take on the added risk. Fortunately, there’s a type of home loan that’s perfect for first-time homebuyers: FHA loans. Here are three of the most important ways FHA loans help first-time buyers:
1. They have flexible financial standards. Are you worried that your credit score or debt-to-income ratio might not be good enough for a conventional mortgage? Since FHA loans are federally insured, lenders are less strict about financial requirements for these loans. Most conventional loans require a credit score of 620, but many FHA mortgages only require a score of 580. Plus, many lenders will qualify people with scores as low as 500 if they can afford a down payment of 10% or more.
2. They have low down payment requirements. According to most first-time buyers, the biggest hurdle when it comes to buying a home is saving up for a down payment. Most people think you need 20% down to purchase a home, but with an FHA loan, you can put down as little as 3.5%. If saving for a down payment has been keeping you from fulfilling your dream of owning a home, an FHA loan could be perfect for you.
3. They might have better interest rates. In some circumstances, FHA loans might allow you to get a lower interest rate than a conventional loan. Plus, your interest rate will be fixed, so you won’t have to worry about it increasing later, as it does with adjustable-rate mortgages. At the end of the day, your interest rate is determined by a wide variety of factors, so talk to your lender and see which loan gets you the best rate possible.
FHA loans may not be for everyone, but they might just be the best option for first-time buyers looking to make their dreams a reality. If you have questions about these types of loans or the process of home-buying, in general, consider attending my Home Buyer 101 Webinar on June 14 @ 7 PM CST. I promise it will be worth your time. Register today!
Don’t hesitate to call or email me for any of your home-buying or lending needs. I am always willing to help!