Question: Are FHA loans only for first-time home buyers?
FHA has become a useful choice for many buyers whose credit situation might make conventional financing more difficult and more expensive.
FHA loans today require a minimum down payment and mortgage insurance for the life of the loan. Although it is not a first-time buyer program, it is very popular with these buyers, partly because many communities offer down payment and closing cost assistance for qualified first-timers, whose income falls beneath certain limits.
FHA is also an excellent choice for those buyers whose credit scores are at the lower end of the scale. Whereas conventional loans require a minimum FICO score of 620, FHA accepts scores much lower. Contact your lender for specific terms or to apply for an FHA loan.
FHA does have a potential disadvantage, and that is the way mortgage insurance (MI) is handled. Lenders require mortgage insurance to limit their risk any time the loan is for more than 80% of the property’s value. With a conventional loan, a borrower can ask the lender to remove the MI once they can demonstrate that the loan is less than 80% of the property’s value. With FHA, the mortgage insurance will be in place for the life of the loan. Borrowers pay MI in two ways: there is an up-front premium that’s added to the loan and a monthly premium that is also added to the payment.
FHA loan calculations can be a little tricky to explain in this medium so you should absolutely reach out to a trusted, licensed lender like ME, to better understand or apply for an FHA loan.
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Roxy Redenbaugh, Broker
Sr Mortgage Consultant
Residential and Commercial
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