What to Think About Before You Apply for Your FHA Mortgage

February 25, 2023

Before you actually apply for an FHA home loan to buy, build, or renovate a home, there are some things to think about.

Being truly ready to fill out those forms doesn’t just mean having your credit ready and your down payment saved, it also means thinking down the road to anticipate things you might need in or for the home after you close the deal and take the keys.

FHA Loan Planning: Consider Upgrading With an Energy Efficient Mortgage (EEM)

Buying a new construction home or a house built in the last few years may not require you to consider adding energy efficiency features like upgraded storm windows or solar energy. But if you buy an older home, applying for extra loan funds with an FHA Energy Efficient Mortgage makes a lot of sense.

How much do you want to pay in utility bills each month? Upgrading could result in significant savings over the entire term of the loan. Ask your loan officer about the FHA EEM add-on to your loan if your house needs these improvements.

Consider a Longer or Shorter Term Mortgage

For some, it’s a no-brainer. A 30-year mortgage features lower monthly payments; for the borrower who needs them, the shorter 15-year loan doesn’t make any sense. But if you want to save more money over time, the shorter loan with its higher monthly payments makes sense.

The interest rate you may be offered on a shorter loan term may be lower than the longer term loan, and that’s an essential consideration for some.

Consider the Size of the Home

 Do not forget that FHA loan limits are higher for multi-unit properties than for single-unit homes. Some look to the future with an eye on monetizing an extra living unit by renting it out; this isn’t possible with a single-unit home since FHA loans require occupancy.

But a multi-unit dwelling (up to 4 units large) is an option for borrowers who qualify for the large loan, and that could factor into your plans if you dream of being a landlord at some point.

And it’s not just about making money from your house. Some buy a home with family planning in mind. If you are in that situation, it’s good to think about buying more home than you need today with an eye on growing into that home tomorrow.

Family planning means having a space you can grow into rather than out of...could the extra expense today keep you from having to consider a larger property tomorrow. 

A larger property will increase in value in a similar fashion to a smaller house, but your power to borrow against that larger home may be appealing if you plan to apply for a HELOC or FHA Cash-Out Refinance loan.

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