If you’re not quite qualified for a conventional mortgage or don’t have enough saved for a down payment to buy a house, you’re in luck. The Federal Housing Administration, formed in 1934, was created to stimulate the economy by encouraging home ownership by making purchasing a home more accessible for the average joe. This means that you (or anyone) can apply for an FHA approved loan and pay as little as 3.5% down.
That’s great news for the person with little credit history, but the FHA has it’s pros and cons. Recently costs associated with FHA loans have skyrocketed, making potential buyers think twice about waiting to get qualified or saving up to put some money down. If you have poor credit history don’t get too excited, as little credit history is different than bad credit history and building back your credit score is a must whether you’re leaning toward FHA or not.
You also can’t go out and apply for an FHA loan on a multi-million dollar property, so be aware of the limits for the loans that you can apply for. Another recent change is that PMI (Private Mortgage Insurance) is now required for the life of the loan, not just the until you build enough equity. Insurance and other fees add up quickly, so don’t forget to take into consideration what you’ll really be paying in the long run.
Despite the many hoops and added costs of FHA, especially lately, applying for an FHA loan can still be a great option for some buyers who can’t quite reach their savings or credit goals. If you’re looking to buy and think you’ll need a hand from the FHA, contact me today for more information to get on the path to home ownership.