What are my home financing options? Part 1
Learn the FHA home financing options available to you.
Many loan programs exist to help borrowers purchase a home. For those borrowers who may not have the cash reserves to pay 20 percent of a home’s selling price, loan programs through the Federal Housing Administration (FHA) may be an option.
Currently, FHA offers 19 primary single family insured mortgage programs that potential homebuyers can utilize to finance a home. One program FHA offers is the 203b Home loan program. The program allows borrowers to purchase a home up to $729,750 (depending on the area) with cash reserves to put down as low as 3.5 percent of a home’s purchase price. Conventional mortgage programs may require as much as 20 percent of a home’s purchase price as a down payment requirement.
According to Michigan State University Extension, an FHA loan may be suitable for buyers who have limited cash reserves and credit scores that are 580 and higher (Depending on the lending institution the loan is secured from). Other caveats to the program are that borrowers have a house payment no more than 29 percent of the gross monthly income with no more than 41 percent of their gross monthly income on a housing payment with debts combined. Second, private mortgage insurance (PMI) is required on the loan. PMI is insurance that protects lenders against the loss of monies on a loan, should a borrower default in making payments. A potential homebuyer can purchase a one-to-four unit property. The property must be occupied as a primary residence or in the case of a multiple unit; one of the units must be owner-occupied. Investment properties are not eligible to be financed through the 203b Home loan program.
Homeownership does not have to seem like a distant fantasy. Knowing what programs options are available helps. This article is but one in a series that will showcase the programs that FHA has for borrowers who desire home ownership.
Other articles in this series: