October 29, 2014 | By RGR Marketing Blog

Big Help for First Time Home Buyers From FHA

Buying a home might be the most important financial decision you or your client will ever make – and it might also represent one of the most difficult processes that a person will go through. As if finding a home that meets all of one’s needs isn’t difficult enough, a first-time homebuyer will also have to find and qualify for a mortgage. And in a competitive real estate market, the need for pre-qualification can’t be understated.

So what if you or your client’s income level is sufficient, but they don’t have enough money saved up for a substantial down payment? Then what are the options? This is where the Federal Housing Administration might be the answer.

What Is the Federal Housing Administration?

The Federal Housing Administration, or FHA as it is commonly referred to, is a government agency that found its origins when the National Housing Act of 1934 was enacted. As part of the FHA’s mandate, the agency is tasked with:

  • Setting standards for underwriting and construction
  • Insuring loans that private lenders or banks originate for home building
  • Improving standards and conditions for housing
  • The provision of an adequate home financing system by insuring mortgages
  • Stabilizing the mortgage market.

 

The mission of today’s FHA is focused on helping prospective borrowers to acquire the funds that they actually qualify for, and in the process, they also help banks and private lenders to reduce their risk when offering loans to less-than-perfect borrowers in the marketplace.

The FHA also provides mortgage insurance to lenders that have received FHA approval – including single and multi-family homes in the U.S. The Federal Housing Administration, through its programs, currently stands as the world’s largest insurer of residential mortgages.

Need Help Buying a Home? The FHA Could Be the Answer

Although there are several benefits to entering into a partnership with the FHA, many qualifying home buyers place the affordable mortgage payments that often come via FHA assistance at or near the top of the list. And while a fairly high middle credit score is often an essential factor in qualifying for a mortgage with many traditional lenders, the FHA program requirements are far less strict.

Mortgage insurance is nearly always demanded of borrowers who are not able to make at least a 20 percent down payment, and FHA loan programs require that mortgage insurance be purchased, though it is offered at an affordable rate. Like many private lenders, the FHA recommends that interested borrowers “should be able to demonstrate employability, job stability, and reliability,” and further notes that during the process of applying for an FHA loan, applicants should be prepared to fill out a lot of paperwork.

Unlike loans that are originated by many private lenders, however, interest rates (especially on the popular 30-year fixed rate mortgage) on FHA loans tend to be lower, which ultimately keeps the total cost of the home down – an attractive proposition to many first-time home buyers. Another benefit has to do with the debt to income ration, which the FHA allows to be higher than it is with many private lenders.

If you’re in the market to buy your first home, or your clients are looking to make their dream of owning a home come true, the Federal Housing Administration might be able to help out. To learn more about the FHA loan programs, visit their website here.

[Photo Credit: Accessible Mortgages]

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