FHA first time home buyer loan from A to Z
Posted on 18. Jun, 2010 by Scott Schang in FHA Home Loan
FHA first time home buyer loans cannot be explained in one sitting. Ok, so the title is a little misleading. I wanted to get your attention and at least start you on the right path with some of the basics.
If you’re just getting started and trying to research FHA first time home purchase loans, you’re in the right spot. With all of the changes and challenges of getting approved for the purchase of a new home, FHA is in the best game in town.
Once you get through this short primer, and if you would like to know more I will point you in the right direction to learn even more, fair enough? Ok, let’s start easy:
The top 5 things you should know about a FHA home buyer loan
1. Lowest down payment available: This program allows for down payment of only 3.5%.
2. FHA loans require mortgage insurance: Mortgage insurance is simply an insurance policy that protects the lender in case you stop making payments on the loan. This allows lenders to offer loans with less than 20% down payment. You are responsible for paying the premiums for this insurance policy. The FHA first time home buyer loan has both an upfront and monthly premium.
3. Upfront mortgage insurance premium: There is an upfront premium for mortgage insurance that is currently 2.25% of the loan amount. Here’s an example:
- Purchase price: $300,000
- Down payment: 3.5% = $10,500
- Loan amount: 96.5% of purchase price = $289,500
- Upfront insurance: 2.25% of $289,500 = $6,613.75
Seems like a lot of money to have to come up with right? Not to worry, a FHA first time home buyer loan allows you to include this premium in your financed loan amount. So, instead of having a loan amount of $289,500, it would include the $6,613.75 and you would make payments on a $296,113.00 loan (the .75 cents has to be paid separate)
4. Monthly mortgage insurance premium: You will also pay a small monthly insurance premium that is included in your mortgage payment. As I write this, the monthly premium is .55% of the loan amount. Here’s an example:
- Loan amount after including upfront mortgage insurance = $296,113.00
- Monthly mortgage insurance premium: .55% = $1,628.62 (annual premium) divided by 12 = $134.72 added to your monthly mortgage payment.
NOTE: H.R. 5072 may increase the monthly mortgage insurance premium and maybe even lower the upfront premium. Drop me a quick email or ask your loan officer what the premium is at the time you are looking to apply.
5. Easier qualifying guidelines: A FHA first time home buyer loan makes it easier for first time buyers to purchase a home. Here’s an example of how a FHA loan is more flexible than a non-FHA loan:
- Allows higher debt to income ratio (determines how much of your income can be spent on mortgage payment)
- Allows for co-signer – A parent or family member can help you qualify
- Allows gift funds for down payment – You can get a gift from a family member to pay all of down payment
- No penalties for credit scores – Non FHA loans have increased closing costs if your credit score is under 740
I think that’s enough to chew on for now, I know I’m feeling full. So I’ll let that digest and write more soon.
If you have questions about qualifying for a FHA first time home buyer loan, you can either email me or leave a comment below and I will be happy to answer your questions!
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10 Responses to “FHA first time home buyer loan from A to Z”
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- - September 23, 2010
[...] the monthly mortgage insurance rate from the existing .55% of the loan amount to .85-90%.The FHA home loan program allows the borrower to go to the highest loan to value (96.5%) of any loan still [...]
- - September 29, 2010
[...] Loan is Best Option for BuyersPosted on 29. Sep, 2010 by Mario Basura in FHA Home Loan TweetThe FHA home loan is the best option for buyers.I do quite a bit of mortgage related reading, there’s a lot of this [...]
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Regarding the upfront MIP, I’m still confused how it works. I just recently bought a home thru FHA. I paid the upfront MIP in full, yet, that amount was added back to my total loan for financing. I didn’t understand that part at all. If I didn’t have the money to pay my upfront MIP, then, I can understant adding that upfront MIP to my total loan and let me finance it. Can you help me understand that. Please email if you can. thanks
My scenerio:
Purchase price: $220,000
Down payment: 3.5% = $7,700
Loan amount: 96.5% of purchase price = $212,300 <—- which should be my financing amount.
Upfront insurance: 2.25% of $212,300 = $4776.75
But my financing amount is still $217076.75 after paying my 3.5% DP and my 2.25% upfront MIP. With taxes, insurance and fees, I paid a little over $17,000 out of pocket for closing.
This is a interesting situation Schwa.
I sent you a email a bit ago. I’d be more than happy to go over this with you.
I would think it would be very difficult for a lender to charge you twice for the MIP. What I’d like to do is take a look at your final HUD so that we can make heads or tails of the fees.
Feel free to shoot me a email back or give me a call on my cell phone at 949-422-0857.
Hope to talk to you soon.
would like more detail information on fha first time buyer loans
Contact Mario Basura (the author) on his cell phone – 949-422-0857. Mario is super sharp and can help you to better understand this program
My fiancee and I have really bad credit, (unfortunately in the 500s) would be be able to qualify for a FHA loan? Or what is the lowest they accept? We dream of a home for our growing family but and would like advise to know what steps to take
Hi Sandra, unfortunately the minimum credit score right now is 640. Although FHA has not set this as the minimum credit score required, most secondary investors have changed their guidelines, therefore making it a fact in today’s lending environment.
Low credit scores are not permanent. I have encountered many folks that simply didn’t know how to build good credit.
If you have not already, email me the best time and number to reach you. Let’s take a look at everything and see where we need to start to get you on the path of homeownership.
It’s not a matter of whether or not you can, it’s more a matter of how long it will take to get you in the position where you can.
My email is [email protected] – I will introduce you to someone that can help at no cost.
Can you tell me more about the Section 184 program for Natives? I live in Oregon but my tribe is located in Wisconsin, would I still be eligible? What’re the pros and cons of section 184, if any
Hi Christi, I am unfamiliar with this program. I am located in the State of California. Are you looking to buy in Oregon? I can do some asking around and I have friends in the business in many States.