FHA Home Loan Options for First-Time Buyers

August 27, 2020

First-time home buyers have a wide range of options with FHA home loans, and those options come with lower down payment requirements and often feature more flexible FICO score requirements than conventional mortgages.

The first thing you should know about your FHA home loan options? FHA loans can be used for a wide variety of property purchases. 

FHA Loan Options

You can buy a condo unit, a typical one-bedroom house in the suburbs, or you can buy a multi-unit property with up to four living units. There are also FHA home loan options to buy fixer-upper properties (the FHA 203(k) Rehabilitation mortgage) and even an option to build a house on the borrower’s lot with an FHA One-Time Close Construction mortgage.

But those are the most well-known options. Did you know you can qualify for an FHA home loan and apply for extra funds to use for energy-saving improvements? That’s a big help for some borrowers, especially those buying fixer-uppers using a rehab loan.

Discount Points

Your FHA loan options also include the ability to purchase discount points on the loan to reduce the interest rate. Keep in mind that FHA loans already feature lower rates than some conventional mortgages, but discount points can help you save money over the lifetime of the mortgage.

A point equals 1% of the total mortgage--buying points can lower your interest rate by .25%. Per point and you should consult your tax preparer as you may be able to deduct this expense for the year you paid it.

Discount points are a good investment if you are going to stay in the loan rather than sell the house before you pay off the mortgage. If you aren’t planning to keep the home that long, this is a cost you may wish to think twice about.

Home Loan Down Payment Grants

FHA mortgages feature a low down payment requirement, but some first-time borrowers struggle to come up with the funds; that is why local agencies offer down payment assistance programs to qualifying borrowers. FHA home loans permit such assistance as well as down payment gifts from family and friends so long as these grants and gifts meet FHA requirements.

Seller Help With Closing Costs

FHA home loans allow your seller to provide up to six percent of the closing costs for FHA home loans. You can’t get more than six percent, you can’t have the lender provide down payment funds, and borrowers should know the sourcing of all such funds will be inspected by the lender.
Getting the right FHA home loan for you means making a plan and talking about your realistic options with a participating lender. There’s no obligation to get some preliminary details from a loan officer about your mortgage options--why not get in touch with one today to learn what’s possible for your new home?


 FHA, VA, and USDA: One-Time Close Loans

Want More Information About One-Time Close Loans?

We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
 
FHA.com provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
 
Please note that investor guidelines for the FHA, VA, and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs:  Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
 
Your email to [email protected] authorizes FHA.com to share your personal information with a mortgage lender licensed in your area to contact you.

1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines.  Most lenders will go up to $750,000 and review higher loan amounts on a case by case basis.   If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.