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 While housing prices are going down, they're still high, and a 20% down payment could really set you back, especially if you are single. FHA only requires a 3.5% down payment (it used to be 3% down until the new housing laws passed). And, until October 1, 2008, you can get it from family, friends, employers, churches, city/county/state funded down payment assistance programs and even seller-assisted down payment programs.
After October 1st, however, you won't be able to use a seller-assisted down payment program. But, you can still use relatives and the city/county/state assisted programs to help you come up with a down payment.
FHA has less stringent qualifying criteria than conventional Fannie Mae and Freddie Mac home loans. For example:
- If you have FICO scores of 550 or higher and a good payment history for the past 12 months, you could qualify.
- If you don’t have a FICO score, you may still qualify by showing non-traditional credit sources like rent receipts, utility payment receipts, to show that you pay these bills on time.
- The FHA permits borrowers to have a higher debt-to-income ratio than most insurers typically allow.
- You could qualify for an FHA mortgage 2 years after your Chapter 7 Bankruptcy Discharge, and while you are in Chapter 13 as long as you making your payments on time, and the trustee gives you permission.
- You could qualify to get an FHA loan 3 years after a foreclosure.
- A qualified borrower can assume FHA loans. Sellers can pay up to 6% of the sale price towards buyer's non-recurring and prepaid closing costs.
Though most people assume that an FHA loan is issued directly from the Federal Housing Administration (FHA), the truth is that FHA simply insures the loan and passes the cost of insuring the loan to the borrower in the form of private mortgage insurance (PMI). This is an insurance policy that safeguards the lenders in case you default on the loan. Once your loan amortizes to 78% loan to value, the PMI may automatically be cancelled. Check with your FHA lender for details. As of 2007, mortgage insurance is tax deductible. It is until 2010. This could save you up to $350 on your taxes.
FHA finances more single family real estate homes than most of the other types of properties combined. FHA rates remain affordable, even if you have less than perfect credit. There is no penalty for early payoff, and there are no termination fees for refinancing, which means that if you refinance your loan and pay it off early, you won’t have to pay additional fees.
According to Personal Finance Editor, Allison Bisbey Colter, in "Consider an FHA Loan" on April 5th, 2007, "Sub-prime lenders are closing up shop or tightening their lending standards, making it tougher for people who are first-time homebuyers or have impaired credit to get financing." The Federal Housing Administration, however, is continuing to step up in an ongoing effort to help borrowers with less than perfect credit buy and refinance homes.
Are you a cash-strapped or credit-challenged first time buyer? Take advantage of the new tax credit offered by the Housing and Economic Recovery Act of 2008 that was just signed into law on July 30, 2008. You can get up to $7,500. Fill out the free loan quote on this page to see if you qualify for a FHA purchase loan or refinance loan. We are experienced with FHA loans, and we’ll be happy to help.
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