FHA loans and buying a home for the first time can be daunting, but no sweat. Here is everything you need to know about getting an FHA Loan for the first time.
What is an F.H.A. Loan?
An F.H.A Loan is a loan insured by the federal housing administration through a F.H.A. approved lender. This loans are extremely useful because with a good credit score this allows you to put down inly 3.5% on your down payment. These loans are meant to be beneficial to first time home buyers and you buy your first home.
Why an F.H.A. Loan?
This can allow you to buy a larger home home or multi family house with a cheaper down payment. This could allow you to house hack, or just get into a property sooner rather than later. It can also allow to save more cash towards a downpayment on another investment property. This can be extremely important because as a real-estate investor you also need to be prepared for the next deal.
Basic Requirements For Getting an FHA Loan for the First Time
- Credit score ( FCIO) of 580 for 3.5% down
- Credit score ( FCIO) of 500-579 for 10% down
- MIP ( Mortgage Insurance Premium)
- Debt to income Ratio < 43%
- Must be the borrower’s Primary residency
- Must have steady income/ employment
With proper preparation any can qualify for a F.H.A. loan. Just remember that qualifying for a loan is like passing a test in school. We all had tests that were difficult because we didn’t understand the subject at hand. Others cam easy because we had an excellent foundation in that area. The same applies for getting financing. Understand how the system works, and what the possibilities are. If you still don’t understand how the process works, contact a local loan officer and learn from them, most are more than willing to help when you are getting an FHA Loan for the first time.
Drawbacks.
The first drawback is that you can only have one F.H.A. Loan at a time which means that you cannot scale this method to invest in real-estate. You also must live in the residence for at least one year. The application process can also take slightly longer to get approved compared to a conventional loan. The drawback is that you are required to pay for mortgage insurance. This is an added cost, however this may be worth it depending on the situation. Every deal is different and you must be able to analyze every deal to determine that the numbers work.
Conclusion
If you are looking to invest in real estate and don’t want to wait until you save up 40k or 50k for a down payment, and F.H.A. loan is an excellent way to go. At the end of the end of the day it is simply another tool on your belt that you can use to achieve your goals. It is your job however to use the tools on your belt and also to get more tools. Study and learn learn as much as you can about the process to be prepared for when you find that perfect deal that you want to buy. The most important thing to remember is that even if you can’t qualify for a F.H.A. Loan when you’re reading this article it is just important to apply it and continue to study so that when the opportunity arrises, and it will, you will be ready.
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