November 29, 2021
What are the FHA loan basics you should know as a first-time homebuyer? The first thing you should remember is that FHA loans are not restricted to first-time buyers, but there ARE state-level down payment assistance programs and closing cost assistance programs that may be able to help you with your FHA mortgage as a first-time buyer.
Those programs can help save you thousands of dollars in up-front costs on the down payment and other expenses with your loan.
Remember that FHA loans permit your seller to contribute up to six percent of your closing costs as an incentive to close the deal, but any amount valued above that six percent results in a dollar-for-dollar reduction in the FHA loan amount.
First-time home buyers are sometimes not aware that they can use an FHA loan to build a home from the ground up. Yes, even a new house hunter should consider this option as the down payment requirement is the same–3.5% for those who qualify with FICO scores, payment history, and reliable income.
FHA Construction loans are used for this purpose and while these types of loan are more complex than buying existing construction, many borrowers find that it’s worth the time invested to build a dream home.
Did you know you do not have to be an FHA borrower currently to refinance your mortgage into an FHA loan? You can use FHA refinancing to convert a conventional loan into an FHA mortgage or convert another non-FHA loan. You can also use an FHA refinance loan to get out of an adjustable-rate mortgage.
FHA mortgages come in fixed-rate versions and adjustable-rate loans.
If you choose an adjustable-rate FHA mortgage you should have a plan for what to do once the introductory rate has ended and you face your first interest rate adjustment. Using an FHA refinance loan to get out of an adjustable-rate home loan is a smart move.
You can refinance an FHA loan to a lower rate or payment using an FHA Streamline Refinance option, but this is not for non-FHA mortgages and features no cash back to the borrower.
And for all FHA mortgages, including refinance loans, there are no penalties for early payoff of the loan.
That said, if you decide to pay off the entire note early, you should contact the lender about doing so as there may be a special procedure for delivering your final mortgage loan payment.
Be sure to follow those instructions and carefully study any fine print that accompanies it–you will want to know what the rules are and whether there are any “gotcha” provisions that levy penalties for non-compliance with the terms of that fine print.
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we’ll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner’s Insurance
Step 9: What to Expect at Closing
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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