It is inspiring when a person in their 20s decides to invest early in their dream home. While most people their age prefer to travel and be nomadic, some plan out their investments for more time to build on them. With a set career path, they focus on fully paying for their dream home by their mid-40s. An excellent way to ease into the bulk of the payments for a home is to get an FHA loan.
What do I need to know about getting an FHA loan?
A Federal Housing Administration (FHA) loan aims to help low- or moderate-income borrowers when they apply for a home loan. As a first-time home buyer, getting an FHA loan can help; however, you must note the pros and cons of employing this loan for your home purchase.
The benefits of an FHA loan include:
- Low down payment: With a credit score of 580 or higher, you will be able to make a down payment of as low as 3.5%.
- Lenient credit requirements: This is a good loan option if your credit score is at least 500, although you may need to make a higher down payment.
- Transferable loans: You can pass on your FHA loan if you decide to sell your home so the buyer can take over.
- Flexible down payment sources: You can use any source to pay for your FHA loans, like gifts from family, inheritance, grants or any down payment assistance program.
Meanwhile, the drawbacks of using an FHA loan are:
- Loan limits: Compared to other conventional loans, an FHA loan is lower, which can be a drawback if your dream home is expensive.
- Property requirements: Applying for an FHA loan means having an FHA-approved appraiser check the property for safety, security and soundness, which may require additional repairs.
- Challenge to close: An FHA loan has a reputation of being more difficult to close, putting off some agents or sellers.
Getting that dream home is something that you should start soon. If you are thinking of using an FHA loan to help you get started, having reliable and experienced legal support can make it less stressful, especially during the closing process.