What's the Right Kind of Home Loan for You?
April 9, 2024
If you have never bought or built a home before, it would be easy to assume there is just one type of loan offered and that it’s just a matter of picking a condo, existing construction, new construction, or deciding to build on your own land.
What kind of loan options wait for you as a first-time home buyer? We examine some of the most popular below.
Mortgages for Suburban Homes
The FHA 203(b) purchase loan is the type of mortgage you want if you seek an existing home in a traditional neighborhood.
The FHA 203(b) loan allows potential owner-occupiers to buy a house that meets FHA and state standards or can be brought into compliance with those standards based on an appraiser’s recommendations.
Fixer-Upper Loans
If you are looking for a fixer-upper house to improve and move into, consider the FHA 203(k) rehabilitation loan.
This loan is specifically meant to buy and renovate or refinance and renovate a house that would not otherwise meet FHA and state requirements. The home must be brought into those standards as a condition of loan approval.
Condos, Duplexes, Manufactured Homes
FHA loans are available for condos, multi-unit properties like townhomes, and manufactured housing. The rules for each type of housing may vary depending on the circumstances.
FHA Loans to Build on Your Own Lot
The FHA One-Time Close construction mortgage is the option you want if you prefer to build a house on your land or on a lot you buy in conjunction with the mortgage. These loans can be more difficult to qualify for, but they are well worth the extra preparation and time saved for the right borrowers.
What to Know
FHA One-Time Close loans have the same FHA FICO score requirements, down payment guidelines, and approval criteria as other FHA mortgages. However, these loans may have differing down payment criteria for borrowers with lower FICO score ranges, so it pays to work on your credit before applying at least 12 months in advance.
Lender standards may vary, especially for construction loans and other higher-risk transactions, so be sure to compare multiple lenders to get the most competitive rates and terms.
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A Few Tips About Your Fixed Rate Mortgage
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What kind of loan options wait for you as a first-time home buyer? We examine some of the most popular below.
Mortgages for Suburban Homes
The FHA 203(b) purchase loan is the type of mortgage you want if you seek an existing home in a traditional neighborhood.
The FHA 203(b) loan allows potential owner-occupiers to buy a house that meets FHA and state standards or can be brought into compliance with those standards based on an appraiser’s recommendations.
Fixer-Upper Loans
If you are looking for a fixer-upper house to improve and move into, consider the FHA 203(k) rehabilitation loan.
This loan is specifically meant to buy and renovate or refinance and renovate a house that would not otherwise meet FHA and state requirements. The home must be brought into those standards as a condition of loan approval.
Condos, Duplexes, Manufactured Homes
FHA loans are available for condos, multi-unit properties like townhomes, and manufactured housing. The rules for each type of housing may vary depending on the circumstances.
FHA Loans to Build on Your Own Lot
The FHA One-Time Close construction mortgage is the option you want if you prefer to build a house on your land or on a lot you buy in conjunction with the mortgage. These loans can be more difficult to qualify for, but they are well worth the extra preparation and time saved for the right borrowers.
What to Know
FHA One-Time Close loans have the same FHA FICO score requirements, down payment guidelines, and approval criteria as other FHA mortgages. However, these loans may have differing down payment criteria for borrowers with lower FICO score ranges, so it pays to work on your credit before applying at least 12 months in advance.
Lender standards may vary, especially for construction loans and other higher-risk transactions, so be sure to compare multiple lenders to get the most competitive rates and terms.
------------------------------
RELATED VIDEOS:
The ARM is an FHA Adjustable Rate Mortgage
A Few Tips About Your Fixed Rate Mortgage
Monthly Payments Establish Good Credit
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