FHA Home Buying 101
Welcome to FHA First Time Home Buyer NJ. It’s as easy as 1 -2- 3 to learn about buying your home with an FHA loan. An FHA loan is a mortgage that’s insured by the Federal Housing Administration (FHA). They are popular especially among first time home buyers because they allow down payments of 3.5% for credit scores of 580+.
What is FHA Loan
The FHA program was created in 1934 to help homeownership, it provides mortgage lenders with adequate insurance; and to help stimulate the housing market by making loans more accessible and affordable for people with less than stellar credit with a low-down payment program. Essentially, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments. This is not just for first time home buyers. Refinancing an FHA Home loan
Low Down Payment
Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. For FHA loans, down payment of 3.5 percent is required for maximum financing. Borrowers with credit scores as low as 500 can qualify for an FHA loan.
Borrowers who cannot afford a 20 percent down payment compared to most conventional loan programs , or can’t get approved for private mortgage insurance should consider an FHA loan for their best option.
Allowed Property Types
FHA loans are only available for primary residence occupancy and you can finance a 1 to 4-unit property, if you occupy the home. Also, FHA mortgages require that the home meet certain lender conditions and must be appraised by an FHA-approved appraiser. More details about FHA 203k Loan
FHA Closing Cost
The FHA loan program allows for a sellers concession towards closing cost which means the Seller can offer a closing cost credit financed into the loan but is limited to six percent of the sale price of the home and while the concessions can be used to pay some of a borrower’s closing costs, these funds can never be used as a down payment for an FHA mortgage.
In addition, down payment monies can be gifted by a family member and you can add a non-occupant co borrower to help qualify should you need to.
FHA requires two kinds of mortgage insurance premiums: The first one is Upfront mortgage insurance premium (UFMIP) and the other is Annual MIP (charged monthly) FHA First Time Home Buyer NJ .