It really doesn’t matter where you live, Kingwood to Katy to downtown Houston, first time home buyers have choices when buying and financing their first home. And according to the National Association of Realtors, first time home buyers historically make up nearly 40% of the market, yet this level has fallen in 2014 but expected to rebound next year. FHA loans are popular among first time home buyers but not because FHA loans are restricted to first timers but due to the lower down payment required. Why are FHA loans a good choice for first time home buyers in Texas?
First, lenders like to make them. FHA loans carry an attractive government-backed guarantee to the lender. As long as the FHA lender approved a loan using accepted FHA guidelines, the lender will be compensated for the loss should the loan go into default. When an FHA lender approves an FHA loan in the proper manner, it’s a no-lose proposition.
The loan guarantee is financed by a mortgage insurance premium, an upfront premium and an annual premium. The upfront premium may be rolled into the loan amount instead of being paid out of pocket and the annual premium is paid monthly.
The down payment requirement for FHA loans is only 3.5% of the sales price. Conventional loans typically ask for a 5.00% down payment along with more restrictive guidelines. Interest rates on low-down payment FHA loans are not penalized and the rates are competitive with other programs.
While an attractive option for first time home buyers, FHA loans can be used by anyone who qualifies for the loan without regard to income, affiliation with the armed forces or the geographical location of the property. There are maximum loan limits set by the FHA based upon the county in which the property resides. Call us to find out the maximum FHA loan limit for your area.
Sellers can contribute up to 6.00% of the sales price of the home, compared to only 3.00% limited by lower down payment conventional loans. For first timers saving money to buy a home, this is a big deal.
FHA loans are guaranteed, certain closing costs can be rolled into the loan amount, low down payment and generous seller contribution amounts all make for an attractive loan option. If you’re a first timer, call us and let’s talk about your next home!