Are you looking to own your part of the American dream? Want to have a place to call your own?
About 32% of all residential sales in 2016 were first-time home buyers.
Buying a home is a huge step in life. As a first-time home buyer, chances are you’ve already started the search for your perfect house. But before you can purchase a home, you’ll need a lender.
One loan to consider is the first time home buyer FHA loan. FHA loans are attractive because of the low down-payment requirement. These loans also offer more flexible qualification requirements.
Want to apply and get approved for the first time home buyer FHA loan? If so, keep reading! We’ll cover 3 tips that will increase your chances of getting approved.
1. Know What’s Affordable
As a buyer, your mantra should be to buy a home that’s financial comfortable for you. While you may want a huge home with a lot of land, being strapped for cash because of your mortgage payment isn’t ideal.
With FHA financing, your mortgage payment cannot be more than 31% of your monthly income.
Before you start shopping, know what you can afford. Use a mortgage payment calculator to combine your existing expenses with a home payment.
When determining your price point, ensure you have money to set aside. As a homeowner, there’s always the risk of appliances breaking. Your monthly budget should allow you to set money aside in an emergency fund.
2. Know & Improve Your Credit Score
As with any mortgage loan, your credit score impacts interest rates. It will also impact down payment percentages as well as loan amount.
FHA loans can be approved with a down payment as low as 3.5%. But, to get approved for this percentage, your credit needs to be above 580. A score of 579 and below requires a down payment of 10% or more.
Before applying for an FHA loan, be sure that your credit is in good standing. To maintain or improve your credit score:
- Pay down credit card balances
- Pay bills on time
- Fix any errors
- Clear up any collection accounts
Once you’ve applied for a loan, you’ll want to avoid applying for any other loans or lines of credit. Otherwise, your score will drop.
3. Save Towards a Down Payment
With the first time home buyer FHA loan, you’ll need to come to the table with a down payment. The amount will depend on the total cost of the home as well as the approved percentage.
As an FHA borrower, you can use various funds as part of your down payment. For example, you can use money from your savings account. Aside from your own money, you can also use funds from:
- A state or local grant
- Cash gifted from a family member or close friend
- A charitable organization
With gifted funds, a letter must be provided. The letter has to state that there is no expectation of repayment. The letter must also disclose the nature of the relationship.
First Time Home Buyer FHA Loan: Wrap Up
The FHA first time home buyer loan is an attractive option. To best position yourself to get approved, follow the tips above.
Of course, you don’t want to go through the home buying process on your own. You’ll need a real estate agent to show homes. You’ll also need a lender who can help you throughout the mortgage loan process.
If you want a committed team of mortgage professionals, look no further than Benchmark Mortgage.
We’re experienced in FHA loans as well as VA, USDA, and conventional loans. As a first-time home buyer, we know how confusing the process can be.
Our team will make home buying easy!
Now’s your chance to start your American dream. Contact our team today to discuss your needs.