If you are considering becoming a first time homeowner, you probably have lots of
questions for what it looks like to make it through the process of purchasing your first
property. In the coming posts, we will be walking you through tips, tricks and need-to-
know steps to guide you in this process.
The first thing you need is funding. For most first time home buyers, a home loan is the
only way to make that dream a reality. GREAT NEWS! There are TONS of loan options
for people just like you. Here are a couple for you to explore with your lending agent:
FHA Loans
FHA loans are loans issued by a private lender and insured by the Federal Housing
Administration (FHA). When you are approved for an FHA loan, the US government
backs the loan to the lender, in the event the borrower is unable to pay the loan back.
If your credit score is not high enough for a conventional loan and a 20% downpayment
is a little too hefty for you, this is probably a great option for you. In order to qualify for
an FHA loan, your credit score will need to be about 570, and you will need about 3.5%
down. If you have a larger down payment, you may be able get away with a lower credit
score.
There are lots of great things about FHA loans, however, there are a few drawbacks.
The main one is that this loan requires mortgage insurance for the life of the loan. That
basically means a dollar amount added to your mortgage every month until the loan is
paid in its entirety. This shouldn’t be a deal breaker for you, but this is a good
conversation with your lender. Other loan restrictions include: the type of house and the
condition of the house.
Despite the drawbacks, FHA could be a good way to go when purchasing your first
home.
Conventional Loans
Another common type of loan is Conventional. This loan isn’t insured by the
government, and therefore adheres to guidelines put in place by Fannie Mae and
Freddie Mac.
A conventional loan can be used to purchase anything from a primary residence, to a
secondary residence, to an investment property. If you have a 20% or higher down
payment, you don’t have to pay mortgage insurance. If you don’t quite have that 20%,
you will need to pay for that mortgage insurance until you reach 20% home equity.
Conventional loan mortgage insurance is less expensive than it’s FHA compatriot.
These and so many more options are out there to help you get a jumpstart on the rest of
your life. As you consider making the leap into home ownership, be sure to do your
research and talk with your lending agent to see what type of loan best fits your needs.
