Things To Remember About Home Loans for First-Time Buyers

August 14, 2021

Are you a first-time homebuyer? There are many options and programs to consider. FHA loans offer a low down payment, more forgiving credit qualifying terms, and perks for the borrower such as no penalty for early payoff. 

Here's a list of some other things you need to know about home loans before you commit to one type or the other.

FHA Home Loans Are Flexible
Your housing choices include mobile homes, condo units, townhouses, duplexes, and mixed-use properties that are primarily residential.

FHA Home Loans Can Be Supplemented With Down Payment Assistance Programs
Your state government may offer a down payment assistance program and/or help with closing costs. Don’t hesitate to take advantage of these options as they are tailor-made for first-time home buyers.

FHA Loans Come in a Variety of Options for Your Interest Rate
FHA lenders and conventional lenders alike offer fixed-rate and adjustable rate mortgages. Conventional loans may have more liberal adjustable rate loan rules when it comes to how often and how much the rate can be adjusted, but FHA mortgages have rate adjustment rules some believe are much more borrower-friendly.

FHA Loans Require A Mortgage Insurance Premium
You will want to save money to pay your upfront mortgage insurance premium unless you plan to include it in your home loan amount. You can either finance the entire upfront premium or pay it entirely in cash at closing time.

FHA loans Aren't Restricted to First-Time Buyers
That means you won't get any special advantage under FHA loan rules for being a first time buyer but your status may get you extra help with your loan if the lender has a first-time buyer program or you apply for a state-run program that favors those who have never purchased a home before.

Budget And Save For All Your Expenses
Do not skip "optional" home loan expenses like home inspections. An appraisal is not a tool for the borrower, it is a tool for the lender. A home inspection is a tool for the borrower and gives you the most fully-informed idea of the condition of the home possible compared to a mere appraisal.

Credit Scores Count
You will need to have a dependable employment record and a good history of on-time payments on all financial obligations for 12 months or more leading up to the loan application.

You Can't Be Backed Into a Corner on Asking Price
If the purchase price turns out to be higher than the appraised value of the home you can choose to walk away from an FHA mortgage transaction instead of committing to a closing date. You cannot be forced to agree to a loan where the asking price is higher than the appraisal. You can choose to pay the difference if you really like the home, but Federal Housing Administration rules will not allow you to finance the difference.

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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