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Did you know that as a first-time home buyer you have the option to purchase a condo unit with an FHA mortgage? There are also options for first-time borrowers to apply for FHA rehab loans for renovations and even an FHA home loan that allows you to build instead of buying.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

First-Time Home Buyer Mortgage Options

June 14, 2021

First-Time Home Buyer Mortgage Options
Did you know that as a first-time home buyer you have the option to purchase a condo unit with an FHA mortgage? There are also options for first-time borrowers to apply for FHA loans designed to let you buy and renovate a property, and even an FHA home loan that allows you to build instead of buying.

These are all options open to first-time home buyers applying for an FHA mortgage. FHA mortgage loans feature low down payment requirements (3.5% for qualifying applicants) and the ability to use down payment assistance in most cases.

FHA Loan Rules and Option You Should Know

First-time buyers should know that FHA home loans don’t come with a zero-down option the way USDA mortgages and VA home loans do. But FHA mortgages do permit the use of approved down payment gifts, grants, or other options for down payment assistance that meet FHA guidelines, state law, and lender requirements.

Many states have programs aimed at low income applicants, moderate-income home loan borrowers, and those who are purchasing property in targeted areas that may or may not meet first-time buyer requirements or income restrictions featured on some state loan and down payment assistance programs.

You read that correctly--you do not have to be a first-time buyer to get certain types of down payment assistance on a home loan in your area. Much depends on the terms and conditions of the individual down payment assistance program. Remember, the FHA does not operate down payment assistance programs, but your state housing finance authority might.

FHA Loans for Construction

There is an FHA version of the One-Time Close mortgage available to any financially qualified applicant including first-time buyers and repeat borrowers. FHA home loan rules say construction loans could technically use down payment assistance the same as with other FHA mortgages. 

But you may find that most lenders are unwilling to accept down payment gifts or grants in conjunction with a One-Time Close loan; the lender is generally interested in the borrower making the down payment as a condition of loan approval.

FHA Down Payment Rules

A borrower using a construction loan may find the lender does not, as mentioned above, accept down payment assistance. But a borrower who wants to build a home on their own lot can use land equity in the lot they own (assuming there is sufficient equity built up) as their down payment.

Borrowers who are not building, but purchasing existing construction cannot get down payment assistance from the seller of the home--this is not permitted under FHA loan rules. 
But the seller is permitted to contribute up to six percent of the sale price of the home toward closing costs, which can help a borrower just as much as down payment help depending on circumstances. It’s an option worth looking into, but remember that you must negotiate this with the seller, it is not automatic.

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Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.

Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing

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