FHA are some of today’s most popular loans. These are originated/financed by banks and mortgage companies, guaranteed by the U.S. Department of Housing and Urban Development (HUD). But to qualify as a first-time buyer, several elements must be considered before the acquisition process.
Now, we know that these are difficult times to acquire a home for the first time, we will need all possible help, and this is where the federal government comes into consideration, by offering assistance programs aimed at anyone who either wants to buy a home for the first time, or has previously owned and is recovering.
To qualify for a 3.5% down payment with the FHA; a minimum credit score of 580 FICO is required. The FHA is much more lenient on the requirements than conventional Freddie Mac and Fannie Mae loans. Below are other basic FHA standards that differ from traditional lending guidelines:
- The FHA allows a down payment of 3.5% with a minimum FICO score of 580.
- Conventional loans have a 3% down payment for first-time homebuyers; or a 5% down payment for those who own home more than three years ago. The minimum credit FICO scores to qualify for a conventional loan is 620.
- With a score of 500 and 580 FICO, you can qualify for FHA loans; however, a 10% down payment is required.
- To qualify for FHA loans, you do not have to pay outstanding collection bills.
On the other hand, if the buyer has problems with the credit report, this program offers greater flexibility to resolve credit anomalies. On many occasions, a simple letter explaining the matter can successfully address the situation. The FHA allows you to consider applications from people who have previously filed for bankruptcy and even suffered foreclosures on their property for defaulting on monthly mortgage payments; you can be approved for the FHA loan without significant difficulty.
Programs offered by the FHA may also include fixed-term interest rate programs, graduated payment mortgages, equity growth mortgages, and adjustable rate mortgages. Another option that has great acceptance is the 203k revitalization program; this is a program to make repairments to any property that you buy, the FHA agency will lend the money required to buy the house and the amount required to cover the cost of the repairs. The only impediment to this program is that the appraiser must justify that the value of the property once renovated is similar to the amount purchased. One of the rules of these programs is that they limit the maximum amount of an FHA-insured loan, this varies depending on the area where you live — however, it changes depending on the conditions.