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5 Tips For First Time FHA Loan Buyers
Author David Schneider | Nov 26,2007
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Buying your first home can be an exciting experience. A home is the most expensive investment most people will make during their lifetime. The hidden investment in homeownership is the equity that builds overtime as the home increases in value. It can be a valuable financial resource. FHA loans are offering borrowers more opportunities to experience the dream of homeownership. Here are a few tips for prospective homebuyers looking for FHA loans.
Five Tips for First Time FHA Loan Buyers: Tip No. 1 -- Pay off Existing Debt
Many homebuyers focus mainly on saving for the 3 percent or 5 percent down payment. They don’t realize the importance of eliminating their credit card and other high interest debt. Credit card debt hinders your ability to save. It can also limit the amount you can borrow when you finally decide to purchase a home. Most lenders expect your total monthly debt to be less than 40 percent of your gross income. Paying off your credit card and other high interest debt will put you in a much better position to secure an FHA loan when you are ready to take the next step to buying a home.
Five Tips for First Time FHA Loan Buyers: Tip No. 2 -- Decide How Much You Can Afford
Consider these two things: How much can you borrow to buy your home? How much money do you have for a down payment? Ideally, your annual mortgage payments, taxes and homeowners insurance combined should not exceed 30 percent of your gross income. Foreclosures are at an all time high. Many are the result of purchasing property that pushes your financial obligations beyond what you can comfortably afford to pay each month. You need to figure out how much you can afford monthly. You should consider all of your financial obligations and your total debt before deciding to buy a home.
Five Tips for First Time FHA Loan Buyers: Tip No. 3 -- Check Your Credit
You should make a habit of checking your credit through the three major credit agencies -- Experian, TransUnion and Equifax -- at least once a year. You will want to pull your credit reports and review them prior to seeking a lender. The FHA looks for a relatively good credit history with timely payments. Make sure to check for any errors that may appear on the reports and have them corrected before you visit a lender.
Understanding your credit score can help you narrow your search when the time comes to choose a lender. For example, you may find during your research that your credit score is not high enough for some lenders, but acceptable to others. Shopping for your mortgage is much easier when you know where to go ahead of time.
Five Tips for First Time FHA Loan Buyers: Tip No. 4 -- Shop Around for the Best Mortgage
FHA lenders have specific criteria that they follow. Still, lenders will have their own guidelines and rates, so shopping around will get you the best mortgage rates. Take your time to conduct a thorough research. Use the Internet, newspapers and magazines to stay informed about the industry and the current market rate. Get mortgage referrals from friends, coworkers and family members who may have recently purchased a home or refinanced.
Make a list of pertinent questions to ask each lender that you call. Ask about the costs, interest rates and payment conditions.
Five Tips for First Time FHA Loan Buyers: Tip No. 5 -- Search for Down Payment Assistance Programs
Many first-time homebuyers have trouble coming up with a down payment. Down Payment Assistance Programs can help. Each year HUD gives states money to pass along to low- and moderate-income families for housing assistance. Some of these funds are set aside for down payment assistance programs. Down Payment Assistance Programs were established to help first-time homebuyers with down payment and closing costs required by the FHA program. These programs provide potential homebuyers with 100 percent mortgage financing. In order to qualify, homebuyers cannot earn more than 80 percent of the region’s median income.
These guidelines should get you started as you prepare for the FHA loan process. Learn all you can about the program and requirements before you begin seeking a mortgage. A thorough understanding of FHA mortgage procedures will prepare you to make wise financial decisions for when you are ready to buy your home.
Buying your first home can be an exciting experience. A home is the most expensive investment most people will make during their lifetime. The hidden investment in homeownership is the equity that builds overtime as the home increases in value. It can be a valuable financial resource. FHA loans are offering borrowers more opportunities to experience the dream of homeownership. Here are a few tips for prospective homebuyers looking for FHA loans.
Five Tips for First Time FHA Loan Buyers: Tip No. 1 -- Pay off Existing Debt
Many homebuyers focus mainly on saving for the 3 percent or 5 percent down payment. They don’t realize the importance of eliminating their credit card and other high interest debt. Credit card debt hinders your ability to save. It can also limit the amount you can borrow when you finally decide to purchase a home. Most lenders expect your total monthly debt to be less than 40 percent of your gross income. Paying off your credit card and other high interest debt will put you in a much better position to secure an FHA loan when you are ready to take the next step to buying a home.
Five Tips for First Time FHA Loan Buyers: Tip No. 2 -- Decide How Much You Can Afford
Consider these two things: How much can you borrow to buy your home? How much money do you have for a down payment? Ideally, your annual mortgage payments, taxes and homeowners insurance combined should not exceed 30 percent of your gross income. Foreclosures are at an all time high. Many are the result of purchasing property that pushes your financial obligations beyond what you can comfortably afford to pay each month. You need to figure out how much you can afford monthly. You should consider all of your financial obligations and your total debt before deciding to buy a home.
Five Tips for First Time FHA Loan Buyers: Tip No. 3 -- Check Your Credit
You should make a habit of checking your credit through the three major credit agencies -- Experian, TransUnion and Equifax -- at least once a year. You will want to pull your credit reports and review them prior to seeking a lender. The FHA looks for a relatively good credit history with timely payments. Make sure to check for any errors that may appear on the reports and have them corrected before you visit a lender.
Understanding your credit score can help you narrow your search when the time comes to choose a lender. For example, you may find during your research that your credit score is not high enough for some lenders, but acceptable to others. Shopping for your mortgage is much easier when you know where to go ahead of time.
Five Tips for First Time FHA Loan Buyers: Tip No. 4 -- Shop Around for the Best Mortgage
FHA lenders have specific criteria that they follow. Still, lenders will have their own guidelines and rates, so shopping around will get you the best mortgage rates. Take your time to conduct a thorough research. Use the Internet, newspapers and magazines to stay informed about the industry and the current market rate. Get mortgage referrals from friends, coworkers and family members who may have recently purchased a home or refinanced.
Make a list of pertinent questions to ask each lender that you call. Ask about the costs, interest rates and payment conditions.
Five Tips for First Time FHA Loan Buyers: Tip No. 5 -- Search for Down Payment Assistance Programs
Many first-time homebuyers have trouble coming up with a down payment. Down Payment Assistance Programs can help. Each year HUD gives states money to pass along to low- and moderate-income families for housing assistance. Some of these funds are set aside for down payment assistance programs. Down Payment Assistance Programs were established to help first-time homebuyers with down payment and closing costs required by the FHA program. These programs provide potential homebuyers with 100 percent mortgage financing. In order to qualify, homebuyers cannot earn more than 80 percent of the region’s median income.
These guidelines should get you started as you prepare for the FHA loan process. Learn all you can about the program and requirements before you begin seeking a mortgage. A thorough understanding of FHA mortgage procedures will prepare you to make wise financial decisions for when you are ready to buy your home. |
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