Have you considered buying a home but can’t afford a 20% down payment on the mortgage? You’re not alone! Many home buyers (especially in New England) cannot afford to shell out $40,000 – $80,000 just to get into your average Boston home. Fortunately there’s another option. FHA (Federal Housing Administration) loans are extremely popular mortgage programs because of their lower down payment requirements and less stringent lending guidelines. With this mortgage program, home buyers can obtain a home mortgage with as little as 3.5% of of the purchase price. For your average Massachusetts home (approximately $350,000) that roughly $12,250…a much more affordable and achievable number. FHA borrowers can use their own savings to make the down payment, but other allowed sources of cash include a gift from a family member or a grant from the government. Another benefit to the FHA program is that is allows individuals with less than perfect credit to obtain a loan. Borrowers need a credit score of just 580 or higher to meet requirements.
Note: An FHA loan may also used to purchase a 2-4 four family home. Many individuals purchase their 1st investments property with FHA or similar “owner occupied” home loan. FHA does require that an individual move into the property for a specific period of time but does not require the borrower to remain in the property for the life of the loan. Talk to your local real estate agent and mortgage broker about whether or not this program is good tool for your purchasing needs.
The FHA allows home sellers, builders and lenders to pay some of the borrower’s closing costs, such as an appraisal, credit report or title expenses. Because the FHA is not a lender, but rather an insurer, borrowers need to get their loan through an FHA-approved lender (as opposed to directly from the FHA). Not all FHA-approved lenders offer the same interest rate and costs — even on the same FHA loan.
The FHA has a special loan product for borrowers who need extra cash to make repairs to their homes. The chief advantage of this type of loan, called a 203(k), is that the loan amount is based not on the current appraised value of the home but on the projected value after the repairs are completed. A so-called “streamlined” 203(k) allows the borrower to finance up to $35,000 in nonstructural repairs, such as painting and replacing cabinets or fixtures.
For more information about FHA loans to get yourself pre-approved for a mortgage, please give us a call at 617-297-8641. We can connect you with one of our local mortgage specialist and get you on your way to home ownership.