August 3, 2023
If you are a first-time FHA home buyer, there are important resources that can help you make smart choices in the earliest stages of the loan. Some of those resources come from your local real estate agent or lender, but more help can come from the FHA itself.
Do Some Early Research
If you include some time to research home loans in the early stages of being a first-time homebuyer, along the way you’ll likely find some information that sounds good but doesn’t really apply to you.
One example comes by way of those financial commentators warning first-time home buyers away from VA and FHA mortgages. Their argument? FHA or VA loans might cost you thousands more than other mortgage loan options.
The argument goes something like this. “First-time home-buyer loans only make you put a little money down, but they cost tens of thousands of dollars more in the long run.”
Often the cost objections include FHA mortgage insurance premium requirements, which require you to pay mortgage insurance for either 11 years or the full term of the FHA home loan.
If you listen to this advice long enough you’ll likely be advised to apply for the shortest loan term possible, save up the biggest down payment you can, and consider making higher monthly mortgage payments.
The idea is that you should get out of the loan as quickly as possible, which in ideal circumstances would be a very good goal indeed.
But this advice overlooks the needs of those who need to pay less upfront and get a lower monthly payment. These borrowers won’t opt for a 15-year mortgage the way the pundits advise.
Do The Math
To be clear, the FHA monthly mortgage insurance premium for a $300 thousand FHA loan will run above $100 a month.
Yes, that translates into paying tens of thousands of dollars over the full 30-year loan. But some American consumers pay “tens of thousands” of dollars for their Starbucks indulgences if you run the numbers over the same 30-year time frame.
But some borrowers prefer a lower down payment and a lower monthly payment. That makes the FHA loan program a more realistic option for these applicants.
What To Do Now
It’s smart not to get all your home loan education from a single source. While there are plenty of articles and online mortgage calculators, you can also get advice directly from a lender, realtor or even the Federal Housing Administration directly.
Consider calling the FHA at 1-800 CALL FHA. Request a referral to a local, HUD-approved housing counselor who can advise you on getting ready for a new home loan.
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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