First-Time Home Buyers Benefit from Low FHA Mortgage Rates; 3.5% Down Payment
By: Rosemary Rugnetta
August 18, 2010 (FreeRateUpdate.com) – Many people were not able to purchase homes during the housing boom that occurred just a few years ago. Home prices skyrocketed putting them out of reach for many individuals. Today, with home prices deflated, the first-time home buyer has both the mortgage industry and the real estate industry working to their benefit. For many who have been sitting on the sidelines, this is the perfect time to be shopping for a new home. First-time home buyers can benefit from the low FHA mortgage rates combined with the required 3.5% down payment. Many are finding themselves in a position to finally afford a home.
The Federal Housing Administration, also known as FHA, has always catered to the first-time home buyer. As these buyers need to consider the overall mortgage package, the required down payment and strict credit requirements are usually the concerns that stop many potential home buyers from taking the plunge to home ownership. With FHA, the first-time home buyer are finding that, although there are guidelines, they are not as strict as conventional mortgages. FHA qualifications can be tedious with the required documentation, but with patience, they are also more forgiving with their decisions.
Taking a look at today’s market, first-time home buyers are benefiting from the record low FHA mortgage rates. FHA mortgages are now one-third of the market. There is also an over abundance of affordable homes for sale to pick from at very desirable prices. Combine a low priced home with an low FHA mortgage rate and the first-time home buyer only needs to have a 3.5% down payment to find themselves stepping into their first home. And there are other benefits to the FHA loan. Closing costs can be incorporated into the mortgage and gifts can be used for the down payment. As compared to conventional loans where the minimum credit score is 720, an FHA mortgage requires a minimum credit score of 620. FHA underwriters look at the entire loan package and will also consider compensating factors to strengthen the approval of a mortgage.
After being put on the back burner for so many years, FHA business is booming. The current FHA mortgage rate is 4% which is very similar to the conventional mortgage rate. Many first-time home buyers are also eligible for additional state funds that are distributed through grants and bonds. Most states, counties and cities have these funds available for first-time home buyers who financially qualify. FHA allows these funds to be used towards the 3.5% down payment together with the FHA mortgage.
Even though some FHA costs are higher than conventional mortgages, it is not affecting this group of people. While normal lending standards have become stricter, first-time home buyers are continuing to benefit from the low FHA mortgage rates and the very attractive low 3.5% down payment. First-time home buyers are out there scooping up the best bargains seen in housing in many years.