March 13, 2019
First-time home buyers don’t have to put 20% down when shopping for real estate they want to live in as their primary residence. The FHA home loan allows a low 3.5% down and this type of home loan has been described as having loose underwriting standards.
Those standards include the FHA minimum credit score of 580 or higher for maximum financing and the lowest down payment, and technically borrowers with FICO scores above 500 are also eligible though with a higher down payment.
Lender standards will apply above and beyond these minimums.
FHA home loans allow borrowers with lower credit and higher debt ratios to qualify for first-time home buyer loans using compensating factors; a higher down payment, a substantial amount of cash reserves, or other, lender-defined compensating factors.
And there is other flexibility, too.
FHA home loans allow the purchase of a wide range of property types including mobile homes, condos, multi-unit real estate, etc.
The only requirement is that the borrower is using the property as the primary residence. You cannot use an FHA Single-Family Mortgage loan to buy investment property you don’t intend on living in yourself.
FHA home loans permit non-occupying co-borrowers, so you can have another person on your mortgage loan without obligating them to live in the property; FHA occupancy rules only state that at least one person obligated on the loan must live in the home as the primary residence.
You are free to pay off the mortgage loan ahead of schedule, make larger payments, etc. without an early payoff penalty.
One of the big advantages of an FHA mortgage is that you are free to refinance at any time once six mortgage payments and six months have gone by on your new home loan.
FHA-to-FHA refinance options include FHA Streamline Refinance loans which have no FHA-required credit check or appraisal.
Talk to a loan officer today about your home loan options and if you already have a non-FHA mortgage you wish to refinance, discuss that option since there are several FHA refi loans you can choose from.
Remember, you don’t have to use your original lender when refinancing if you don’t want to.
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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