January 24, 2019
FHA home loans can help any financially qualified borrower get into a new home with a low down payment and more forgiving credit requirements. The FHA home loan program is for first-time home buyers and experienced homeowners alike.
How FHA Mortgage Loans Differ From Other Home Loans For First Time Home Buyers
How do FHA mortgage loans differ from conventional mortgage loans, USDA loans or VA mortgages? There are many factors. One important difference between FHA mortgages and conventional loans is that unlike some mortgage loans, an FHA loan for a starter home or other principal residence has no penalty for early payoff of the mortgage loan.
FHA loan rules specifically deny the lender the ability to penalize a borrower for paying more than the monthly mortgage payment and/or paying off the mortgage loan earlier than the full loan term.
FHA loans differ from USDA mortgages because USDA loans have income limits and other requirements that may dictate who is eligible for loan approval. USDA loans have income limits and may seem far more need-based than an FHA mortgage.
FHA home loans for new homeowners or returning borrowers have no income limits, no need-based application criteria, and the largest FHA-required down payment is 10% for borrowers with FICO scores that fall outside the FHA guidelines for maximum financing.
FHA Mortgage Loans For First-Time Home Buyers Are Flexible
It is easy to assume that the only kind of FHA mortgage loan available is for a suburban house suitable to start or raise a family in; the truth is that FHA mortgages are also available for fixer-upper homes thanks to an FHA mortgage called the 203(k) Rehabilitation Loan.
You can purchase a town home, condo unit, mobile home, or mixed-use house (as long as the residential nature of the property is not compromised by the non-residential use of it).
FHA Mortgage Loans Don’t Allow Restrictive Homeowner Association Covenants
If you are thinking of buying a condo unit or a home that is part of a neighborhood homeowner association, the rules of the FHA mortgage program forbid loan approval for any property that has restrictive covenants such as the right of first refusal or other clauses that restrict the borrower’s ability to freely sell or transfer the home.
Talk to a participating FHA lender today about the flexibility of FHA home loans-be sure to tell the loan officer what kind of home you would like to purchase with an FHA mortgage loan, and if you are a first time home buyer, be sure to discuss your long-term plans for the home. If you plan to stay a long time in the first home you buy, your loan choices may differ than for those who don’t intend to stay in the home for many years.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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