Traditionally FHA mortgages were used to help first time home buyers with non-traditional credit backgrounds. However FHA mortgages have increased in popularity over the last few years. The low 3.5% down payment has helped buyers with limited savings to get into a new home. Move up buyers are using FHA mortgages more as they sell a home and may need to help offset money needed to bring in on the sale of their current home. If they owe money on their current home, it's much easier to come up with 3.5% than 5% or more for a down payment.
Did you know FHA mortgages are assumable? This could definitely help sellers with the current interest rates being as low as they are. As rates climb, it may help to be able to sell a home with an interest rate of 3.25% that someone can assume. The new buyer will have to qualify for the mortgage, but the current owner will be able to get a release of liability so they can buy a new home without worrying about the current mortgage.
Some other facts that aren't as well known:
- After a chapter 7 bankruptcy you only need 2 years from the discharge date. If there were extenuating circumstances, you may only need 1 year. Conventional loans typically require at least 4 years.
- If you are in a chapter 13 bankruptcy, you can buy a new home as long as the trustee agrees and you have a year of on time bankruptcy payments.
- You can use assets from savings clubs, wedding registries, employer gifts and down payment assistance programs.
- You can have a non-0ccupying co-borrower help you qualify if your income is not high enough. Frequently parents will help a college student buy their first home this way.
FHA loans can be a great way for many buyers to get into a home. If you are considering buying a new home and aren't sure what is the best option for you, contact me or your loan officer and see if FHA may be a good program for you to use.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants – Email – Website
