September 21, 2023
First-time home buyers looking for an affordable home loan often turn to the FHA mortgage. The low downpayment requirement for those who financially qualify is an option worth looking into.
Many first-time FHA borrowers have questions. Here are some of the most frequently asked.
Do FHA Borrowers Need A Real Estate Agent?
A real estate agent is not a requirement when you buy a home with an FHA mortgage. That said, many prefer to work with a real estate agent or realtor since they can be helpful for those who don’t know the local area and to those who need help finding a home near the right services.
Some house hunters are simply are not comfortable navigating the purchase of a home and in such cases a real estate agent can help.
Getting A Lender Before An Agent
Consider finding a participating FHA lender to work with before you start looking for a real estate agent. When you enter the house hunting phase, being prequalified or preapproved for a home when you start working with the agent can save time.
Prequalification Versus Preapproval
Some lenders and even real estate agents use these terms interchangeably, but they are actually two separate things. What is the difference?
FHA loan pre-qualification is the basic equivalent of the lender’s estimate of your ability to afford the FHA loan. This is based on information you provide, (estimated credit score, take home pay and/or gross income, plus related information.) No credit agency pull is accomplished here.
FHA loan pre-approval is different. It refers to the lender’s decision as to how much you may borrow.
This decision is based on information from credit agencies, employers, and your pay data. Pre-approval means being able to make a more serious offer on the home and tells the seller you are not just window shopping.
How Long Is An FHA Mortgage?
FHA home loans are typically offered in 15-year and 30-year FHA mortgages. What is the advantage of a 15-year mortgage?
In many cases, it’s lower interest rates and lower overall costs for the loan, assuming you pay the loan off over 15 years. But there are disadvantages, primarily from higher monthly payments than required for a 30-year mortgage.
How Much Are My FHA Loan Closing Costs?
The dollar amount of your closing costs will vary depending on the transaction, and there is no way to provide a specific estimate. Instead, plan on spending between two and six percent of the sale price of the home in closing costs.
There may be expenses associated with the FHA mortgage that affect the amount of your cash needed to close the FHA loan:
- Document preparation fees
- Application fee
- Appraisal fee
- Compliance inspection fees (where applicable)
- Title search fees
- Borrower-retained legal assistance
- Lender-required inspections
- Credit report fee
Ask a lender about these fees and how early to save up for them if you aren’t sure.
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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