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Prior to the introduction of the
Federal Housing Administration�s entrance into
the mortgage marketplace, lending guidelines
were all over the map. There really was no
universal loan program that all mortgage
companies could follow which kept many potential
buyers on the sidelines, especially first time
buyers who could be asked to make a down payment
of 20 or 30 percent or more. Today, the FHA
First Time Home Loan Program requires a down payment of only
3.5
percent of the sales price and is the loan
program of choice for those buying their very
first home.
First Time Home Buyers
choose the FHA
loan over all other mortgage programs for
multiple reasons. The most common reason is the
low down payment mentioned earlier. Unless
someone is eligible for a
VA Loan or
the property is located in a rural area and
qualifies for a USDA mortgage, there really is
no other loan program that asks for such a low
down payment while still providing a very
competitive interest rate.
Note that the
FHA does not
approve or otherwise handle any part of the
evaluation process but individual mortgage
lenders do. Lenders follow prescribed lending
guidelines and in return they receive a
guarantee from the FHA. The guarantee
compensates the lender should the loan ever go
into default. This guarantee is financed with
two separate mortgage insurance policies, an
upfront policy which is rolled into the loan
amount and an annual one which is paid in
monthly installments throughout the life of the
loan.
And for those with blemished credit,
FHA First Time Home
Buyer Loans provide the lender with a
bit more flexibility as it relates to credit
history and credit scores. Unfortunately, too
many potential first time buyers don�t take the
first step because they mistakenly believe their
credit past will keep them from their home
ownership dreams. The
FHA First Time Home Buyer Loan is
more lenient as it relates to credit as compared
to conventional loan programs with less than 20
percent down.
First Time Buyers
can also select from a varied group of loan
types. The most popular choice today for a
mortgage is FHA�s 30 year fixed rate loan. The
fixed rate loan ensures the principal and
interest payment will never change at any point
into the future while the 30 year term provides
the lowest fixed payment. Other offered loan
terms for first time buyers include a 10, 15, 20
and 25 year term. In short, the longer the loan
term the lower the monthly payment.
FHA First Time Home
Buyer Loan can also be in the form of
an adjustable rate mortgage offered as a hybrid.
A hybrid is an adjustable rate loan that is
fixed for a predetermined period of time before
turning into a loan that can adjust once per
year. However, most first time buyers tend to
own their first property for seven years or more
and instead should consider a fixed rate term
which is more easily planned for well into the
future. Speak with an experienced loan officer
to determine which program best suits your very
first home purchase.
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First Time Home Buyer Loan
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