FHA mortgages: Low down payments, specialized programs

First time buyers can be confused by the process of buying a home and getting a mortgage. The first thing we'll suggest is shopping and comparing mortgage options before looking for your next home. Using a mortgage comparison calculator helps with pinpointing your best home loan from among several mortgage quotes. For buyers short on cash for a down payment or without excellent credit, an FHA loan can offer an affordable way to transition from renting to owning your home.

Mortgage loans: Getting the approval you need

FHA can get you into a home or refinance your mortgage if your credit score is not perfect or your home value has tanked. Benefits of FHA loans include:

  • FHA guidelines emphasize verifying an applicant's ability to make mortgage payments. If you haven't established credit, FHA allows lenders to accept "alternative forms of credit" such as rent and utility payments.
  • FHA loans provide a minimum 3.5 percent down payment with a credit score of 580 or more. FHA currently requires a minimum FICO credit score of 500, but scores between 500 and 579 require a minimum down payment of 10 percent.
  • Less home equity is needed for refinancing: If you can't refinance with a conventional mortgage, check out FHA loans.

If your credit scores are near 580, it may be worthwhile to work on achieving scores of 580 or more to qualify for the lower down payment option.

More than mortgage rates: Reading mortgage quotes carefully

FHA requires mortgage insurance premiums, with part paid up-front at closing and the balance added to your monthly mortgage payments. FHA loans also require lenders to collect funds for paying property taxes and hazard insurance; you'll want to know how much you can expect to pay for these expenses in addition to the principal and interest payments (P&I) payment provided by mortgage calculators. You can estimate closing costs using a closing costs calculator, but expect your actual costs to vary.

Using online mortgage calculator tools can help with preparing for the mortgage application and approval process.




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