James A. Wood's Blog
If you’re hoping to buy your first home in the near future, you’re likely wondering about the different types of mortgages that you may qualify for. Since the 1930s, the Federal Housing Administration (FHA) has been insuring home loans for first-time homeowners across America.
This program helps people achieve homeownership who typically wouldn’t be able to afford the down payment or pass the credit score requirements to secure a traditional mortgage.
In today’s post, we’re going to answer some frequently asked questions about FHA loans to help you decide if this is the best option for your first home.
Does the FHA issue loans?
Although they’re called “FHA loans,” mortgages are not actually issued by the FHA. Rather, they’re issued by mortgage lenders across the country and insured by the FHA.
Will I have to make a down payment?
With an FHA loan, your down payment can be as low as 3.5%, significantly lower than traditional loans at 20% down payment. However, you will be required to pay private mortgage insurance (PMI) in addition to your monthly mortgage payments until you have paid off 20% of the home. So, the best case scenario would be to save as much as possible for a down payment to reduce the amount of mortgage insurance you have to pay.
What are the benefits of an FHA loan?
The three main reasons to secure an FHA loan are:
You can qualify with a low credit score
You can make a smaller down payment than traditional mortgages
Your closer costs will be less expensive
Where do I apply for an FHA loan?
You can apply for an FHA loan through a mortgage lender. You can also work with a mortgage broker to help choose a lender.
Is an FHA loan the only loan option for low down payments?
There are multiple loan programs offered at the state and federal level to help individuals secure a mortgage with a lower down payment. They can be provided by the Department of Veterans Affairs, the USDA, or state-sponsored programs. Lenders also often sponsor their own programs to attract potential borrowers. However, always make sure you compare these programs to make sure you’re making the best long-term financial decision.
Do all FHA loans offer the same interest rates and costs?
No. Since the loans are only insured by the FHA, it’s up to the lender to determine your interest rate and fees. So, it’s a good idea to shop around for the best lender.
How high does my credit score have to be to qualify for an FHA loan?
You can secure a mortgage with a down payment as low as 3.5% with a credit score of 580 or higher. However, if you can afford to make a larger down payment, you can secure an FHA loan with a credit score as low as 500.
If your score is in the 500-600 range, it’s typically a better idea to spend a few months building credit before applying for a home loan.
What information will I need to apply?
You’ll need to gather all of the same information that you would for a typical mortgage. This includes W2s from your employer(s), two years of submitted tax forms, your current and former addresses from the past two years, and your gross monthly salary.
I’ve owned a house before, can I still qualify for FHA loans?
Even if you’re not a first-time homebuyer you can still qualify for an FHA loan. However, you cannot qualify if you’ve had a foreclosure within the last three years or have filed for bankruptcy within the last two years.
Buying a home represents a dream come true for many individuals. However, to transform this dream into a reality, you'll likely need to qualify for a mortgage.
Finding the right mortgage may seem difficult, particularly for a first-time homebuyer. Fortunately, we're here to help you make sense of all of the mortgage options at your disposal so you can select the right option based on your budget and lifestyle.
Here's a closer look at three of the most common mortgage options for homebuyers.
With a fixed-rate mortgage, there are no cost fluctuations. This means that you'll pay the same amount each month for the duration of your mortgage, regardless of economic conditions.
For example, if you sign up for a 15- or 30-year fixed-rate mortgage, you'll wind up paying the same amount each month until your mortgage is paid in full. In some instances, you may even be able to pay off your mortgage early without penalties.
A fixed-rate mortgage often serves as a great option for those who don't want to worry about mortgage bills that may fluctuate over the years. Instead, this type of mortgage guarantees that you'll be able to pay a consistent monthly amount for the life of your loan.
An adjustable-rate mortgage represents the exact opposite of its fixed-rate counterpart. The costs associated with this type of mortgage will change over time, which means you may wind up paying a fixed interest rate for the first few years of your loan and watch this rate go up a few years later.
For instance, a 5/1 adjustable-rate mortgage means that your interest rate is locked in for the first five years of your loan. After this period, the interest rate will adjust annually. Therefore, a rising interest rate may force you to allocate additional funds to cover your mortgage costs in the future.
An adjustable-rate mortgage may prove to be a viable option if you plan to live in a home for only a short amount of time. Or, if you're a college student or young professional, an adjustable-rate mortgage may help you pay less for a home now, secure your dream job and become financially stable by the time your initial interest rate period ends.
3. VA Loans
The U.S. Department of Veterans Affairs (VA) provides loans to military service members and their families. These loans are backed by the government and enable individuals to receive complete financing for a house. Thus, with a VA loan, an individual is not required to make a down payment on a house.
If you ever have concerns or questions about mortgage loans, banks and credit unions are available to help. Also, your real estate agent may be able to offer mortgage insights and tips to ensure you can secure a mortgage quickly and effortlessly.
Learn about all of the mortgage options that are available, and by doing so, you can move one step closer to buying a home that matches your budget and lifestyle.
The Florida luxury housing market can be tough to navigate, regardless of whether you want to buy a deluxe residence in Orlando, Tampa Bay or elsewhere in the Sunshine State. Lucky for you, we're here to teach you about the Florida luxury housing sector and ensure you can quickly and effortlessly discover your dream residence.
Now, let's take a look at three tips to help you analyze the Florida luxury housing market.
1. Collect Luxury Housing Market Data
Florida luxury housing market data is readily available, and if you know where to look for it, you should have no trouble locating your ideal house.
Oftentimes, a simple online search can help you find luxury residences in the Florida city or town of your choice. If you want to pursue a luxury house in Fort Lauderdale, St. Augustine or any other Sunshine State city or town, an online search may prove be a great starting point.
You also should evaluate the prices of available luxury houses in your preferred Florida cities and towns. This information will help you narrow your price range so you can speed up your home search.
2. Differentiate a Buyer's Market from a Seller's Market
Believe it or not, determining whether the Florida luxury housing market currently favors buyers or sellers can be easy. If you allocate time and resources to study the local housing sector, you can gain the insights you need to distinguish a buyer's market from a seller's one.
A buyer's market usually features a massive selection of high-quality luxury residences. In this market, a buyer may be better equipped than ever before to acquire a Florida luxury residence at or below its initial asking price.
Conversely, a seller's market is defined by a shortage of top-notch luxury houses. As a result, a buyer may need to submit a competitive offer to purchase to quickly acquire his or her ideal Florida luxury house.
Once you determine whether the Florida luxury housing market favors buyers or sellers, you can map out your homebuying strategy accordingly. Then, you can seamlessly navigate the luxury housing market in Jacksonville, Miami or other Sunshine State cities or towns and acquire your dream residence in no time at all.
3. Collaborate with a Real Estate Agent
When it comes to analyzing the Florida luxury housing market, collaborating with a real estate agent typically is a good idea. In fact, a real estate agent who understands the ins and outs of buying a luxury house in Florida can offer expert insights that you may struggle to obtain elsewhere.
A real estate agent can teach you about all aspects of the Florida luxury housing market. Thus, if you want to acquire a luxury home in South Beach, a real estate agent can help you pursue deluxe houses in and around Miami. On the other hand, if you wish to buy a luxury house near Disney World, a real estate agent can help you make your homeownership dream come true.
Use the aforementioned tips, and you can perform a full analysis of the Sunshine State luxury housing market.