Repeat Homebuyers Also Benefit From FHA Loans
Is FHA a Loan for First Time Homebuyers?
The short answer is yes. However, FHA loans do not ONLY apply to first-time homebuyers. It has earned a reputation as being a first-time homebuyer loan because of its popularity for that group of buyers. Repeat homebuyers also enjoy FHA loans.
You may want to consider an FHA loan if you’ve been thinking about buying a home. While generally thought of as a first-time home buyer loan, it can also be a viable option for repeat buyers. FHA loans have more relaxed guidelines. You, and others like you, will be able to buy a home with more options.
FHA loans appeal to first-time homebuyers because your credit score doesn’t have to be as high and there is more wiggle room for the down payment. Also, first-time home buyers often do not have a lot of credit built up to prove credit-worthiness.
This is important to note as an FHA loan isn’t actually a loan at all, rather, it is insurance for the loan that is provided by the lender. The lenders usually have much higher credit requirements because they are responsible for the loan themselves if it defaults. FHA loans take on that responsibility for the lender should the loan default.
FHA Loans are Also for Repeat Homebuyers
These loans can be a great option for repeat homebuyers who have been subject to a foreclosure on a previous home. The foreclosure process is usually detrimental to the credit score so FHA loans relaxed guidelines can be very helpful in this situation.
Many homebuyers may have lost money in a prior property during the housing recession and now they do not have the resources for a large down payment.
Repeat homebuyers can take advantage of FHA loans if they meet the same requirements and the home will be their primary residence.
What are the FHA Loan Requirements?
With respect to down payment, you are two different options for FHA loans. One is a down payment of 3.5 percent. You must have at least a 580 FICO credit score to qualify for this down payment. You can have a credit score of 500 to 579 and still qualify, but with a 10 percent down payment.
To take advantage of an FHA loan, you must have a stable work history or have been at your current job at least 2 years. You will likely need to be 2 years out of bankruptcy and 3 years out of foreclosure. There are exceptions to the rule.
Things to Remember
There are a few things to keep in mind a few things when considering an FHA loan. The lower your credit score, the higher the interest rate will be. Factor in the cost of mortgage insurance. Additionally, because the loan is being insured by the Federal Housing Administration, it is subject to their appraisal standards. FHA loans must be used for a primary residence, but it can be a multi-unit residence as long as the buyer lives in one of the units.
FHA loans, while typically considered a first-time home buyer loan, really are there for any potential homebuyer. Check into your eligibility. For more information, go to the Federal Housing Administration website.