March 16, 2021
Looking for a home loan that’s affordable and doesn’t require 20% down? The FHA loan program has something for you.
Some are surprised to learn that FHA mortgages are not limited to those in financial need like certain USDA mortgages, and they are not restricted to first-time home buyers.
FHA Loan Options Are Diverse
You can buy much more than a typical suburban home. Options include getting a condo unit with an FHA mortgage, building a home on your own lot from the ground up using an FHA One-Time Close construction loan, or you can refinance your existing mortgage. That mortgage can be an FHA or non-FHA mortgage using an FHA loan.
No matter what kind of home loan you need–a purchase loan, a rehab loan, a refi loan–there are some things to do ahead of your home loan and things not to do.
Shop Around
One thing NOT to do? Accept the status quo with your current bank. Some borrowers are tempted to use the same financial institution they’ve been using for their savings accounts and money market investments.
But does that lender really have the best home loan terms? Shop around and find out, even if you don’t want to use any other lender.
Why? Because shopping around lets you take the results of your research to the lender you have now to your current bank. Ask them to match the better deal offered to you elsewhere and see what they can come up with!
Do The Right Math
Some borrowers do the math on their home loan early. Maybe TOO early in some cases–they run the numbers without knowing the full story about which numbers the borrower needs.
These future loan applicants naturally want to know if they can afford the loan in their current financial position and make choices accordingly.
But miscalculating your monthly mortgage payments is an easy mistake to make—did you run your numbers using a formula that includes ONLY principal and interest times the term of the loan?
Online Mortgage Calculators
Some err and do the mortgage calculation wrong because they forgot to include consideration of monthly homeowner’s association fees where applicable, plus property taxes, and other recurring costs associated with your loan. For best results, try using an online mortgage calculator that will prompt you for all the types of information needed.
In the planning stages or at application time for your mortgage, it is a terrible idea to apply for a store credit card, car loan, personal loan, payday loan, cash advance, etc. as doing so can result in a hard inquiry into your credit report, which lowers your FICO score temporarily.
And on top of that, your participating FHA lender does not want to see that you have applied for other credit while applying for a home loan–it makes the lender’s job of justifying you as a good credit risk harder to do.
It also makes things complicated in association with your down payment, which cannot be sourced from non-collateralized loans like a cash advance on a credit card. If your lender sees such transactions in your credit history too close to loan application time it could raise a question about the sourcing of your down payment.
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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