Buying your first house is exciting and challenging at the same time. The excitement part comes from the feeling of having something to call you own, while the challenge part comes from the responsibility of having to pay for it. And paying for a mortgage is no easy feat. It takes discipline and a stable job to that. Fail in any of these can result to home foreclosure.
If you are a first-time homebuyer, there are several things you need to understand first before shelling out your hard-earned money. One of them is the importance of getting an FHA loan.
What is an FHA loan? An FHA loan is a mortgage loan that is insured by the Federal Housing Administration or FHA. This is a loan that can be issued by qualified lenders.
FHA loans are beneficial to those with lower incomes because with the insurance provided by FHA on their loans, they can purchase a home without having to spend thousands of dollars. FHA keeps the initial costs of buying a home at a low level. The agency also gives lenders security. Why? People with low income normally wouldn’t qualify for conventional loans. What FHA does is it insures the loan so that lenders can extend the loans to those who can’t afford a large payment. In case you default on your home, the lender will be paid by the insurance funds.
With an FHA loan, you can buy a house by paying only 3% down payment. It can also be used to buy a second, third, and even a fourth home. The only catch is you are only allowed to have one FHA loan at a time.
To qualify for an FHA loan, you must have:
- Enough cash to cover the 3% down payment
- Closing cost expenses that include things like attorney’s fee, homeowner’s insurance, title fees, title insurance, and loan origination fee.
- Good credit history Remember that FHA DOES NOT give out these loans. They only insure them. You have to go to your lenders to apply for the loan.
If your income still can’t afford the 3% down payment, you can still pay for it through the help of down payment assistance and community redevelopment programs. You can receive grants such as seller-funded programs, Grant America Program, American Dream Down Payment, and many others.
Buying a home is not necessarily a huge challenge with these types of housing assistance programs.