FHA for First Time Home Buyers

Should first time home owners go FHA and how strict is FHA?

1 Answer

As with most questions, the answer here is 'it depends'.  The most important thing to make sure of is to use a qualifed mortgage officer who has FHA available but has the product knowledge AND availability to present all viable options

**FHA **is used for many reasons: Low Down Payment Requirement, Seller Contributions to Closing Costs/Pre-paid Expenses can be 6% of the sale price, FICO standards at most lenders using the program are lower than for conventional loans, Mortgage Insurance rates are lower, Non-Resident Co-Borrowers [co-signers] are allowed by simply pooling income and credit obligations.

That said, there are other programs out there for 1st time home buyers, too.  [And FHA is NOT just for 1st timers]. The Rural Housing Program and VA program allow for 100% financing with a guaranty fee that is financeable without a monthly mortgage insurance premium.  There are income & property location restrictions with the former and a family support requirement that must be reached to use the VA program.

Property guidelines with FHA are not as strict as they once were, but fixer-uppers should be considered as candidates to use the 203k rehab program through FHA.  If credit scores are below 620, it is possible to go FHA, but not easy.  Credit glitches should be at least 12 months in the past.  Alternate credit references are allowed, but it depends on the lender as to whether or not they will be considered.  Co-signers do NOT offset poor credit.  They are used to help with debt-to-income ratios, length of employment issues, or something else not detrimental to payment patterns of the borrower.  Gifts from family are allowed as well to help with down payment & closing costs.  And these differences from conventional loans set the program apart.  The key is to have an experienced loan officer who can offer you sound advice in your purchase transaction.