FHA is a home loan program where private mortgage insurance is provided by the Federal government. Most major banks offer FHA program options. Although the program is often utilized by first time home buyers, it is not limited to first time buyers. This blog provides MA FHA home loan program overview and pre-approval advice to help you decide whether it is a home loan program that you should consider.
Positive Features Of FHA Loans
There are a few notable positive features of FHA loans. The required down payment for an FHA mortgage is 3.5%, which satisfies MA home buyers who do not have a large down payment. FHA loans also allow buyers to receive funds for down payment and closing costs as a gift from a family member. Another benefit of is the streamlined refinancing alternative that allows a refinance to a lower interest rate without getting a updated appraisal, useful if interests rates drop but home values are also low. My company often does these refinances with NO CLOSING COSTS. Finally, FHA programs are assumable, meaning that when you go to sell the home, a buyer can take over your mortgage at the existing interest rate. This can be a big selling point when interest rates are high.
Disadvantages Of FHA Financing
There are positive features of FHA loans to note. The private mortgage insurance (PMI) on an FHA loan is often higher than a conventional loan. There is an up-front fee at closing and a recurring fee due with each payment until the balance is paid down below 80% of the purchase price (or updated appraised value). For MA condominium units, the condo building must meet certain criteria such as minimum reserves and minimum owner occupancy rates. Converted MA multi-family buildings and duplexes are therefore unlikely to get approved. MA single family houses must also meet certain requirements geared towards safety matters.
FHA Pre-approval Advice
Before applying for an FHA pre-approval, review your credit report and address any mistakes. Also obtain important financial documentation such as bank statements, tax filings from past years, recent pay stubs, and investment account statements. Loan officers will typically ask for a copy of these items. Ask a mortgage professional to receive potential monthly payments (based on a specific purchase price and your credit qualifications) and closing costs before getting too far in the process.
MA FHA Home Loan Program Overview
FHA makes a home purchase achievable for some MA home buyers who may otherwise not qualify for financing, so it is a great program to consider. The unique advantages that it features also makes refinancing and selling a home easier in the future. However, it does have disadvantages such as the higher fees and property-specific requirements, so not everyone can or may want to use an FHA home loan program. Consider the disadvantages of FHA financing and the positive features of FHA loans detailed in this MA FHA home loan program overview blog and speak to a professional before making any decisions.