If you are trying to purchase a home for the first time, something you may have suggested to you is a Federal Housing Administration, loan. This kind of loan is a mortgage insured by the Federal Housing Administration through an approved lender. Loans of this kind are available to lower-income borrowers who may not have enough money for a full 20% down payment.
These loans are also beneficial for those with lower credit scores since they don’t require a credit score as high as some other kinds of conventional loans. This makes FHA loans popular among first-time buyers, though they can be used by anyone who qualifies.
How much money can you get toward a house with an FHA loan?
As of 2021, you can get up to 96.5% of the value of the property using an FHA loan. The remaining balance is what you’ll need as a down payment (3.5% of the total value of the property). If you cannot afford that down payment, you may be able to purchase with no money down if you can obtain a grant. Otherwise, down payments come from your personal savings.
The downside of an FHA loan is that borrowers have to purchase mortgage insurance, which can make the monthly payments much more expensive. This is why those who are able to get at least 20% of the price of a new home ready for the down payment may opt for other kinds of loans, assuming they have a high enough credit score.
FHA loans are a good place to start if you have a lower credit score or can’t afford a high down payment. They are, though, just a few of many options available to potential homeowners.