5 Reasons FHA Loans Work Well for First Time Home Buyers

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FHA loans have many benefits for all home buyers. But they really seem to work well for first time home buyers in particular. A lot of first home buying stories center around the FHA process. While the FHA loan isn't tailored specifically for the first time buyer, it does seem to work out that way often. So, why is that?

Here's a list of 5 reasons why FHA loans work so well for that first house.

1. Low down payment requirement. The required amount for a down payment on an FHA loan is 3.5% of the purchase price. So if you're buying a $100,000 home, you'll need a cash reserve of $3,500. Conventional mortgages can sometimes require 20% down. Imagine needing to save up $20,000 for your first home. This is probably the biggest reason many first homes are financed through FHA.
2. Your down payment can be a gift. Whether it's from your parents or your bridal registry, you can use a gift for your down payment. Other mortgage loan options do not allow gifts for down payments. Also, sellers can contribute up 6% of the sale price to help cover closing costs.
3. More forgiving credit numbers. FHA loans can often be a little more forgiving on credit scores. You don't need perfect credit - but you do need decent numbers.
4. If the house needs work, FHA 203k to the rescue. When you're looking for homes and you find things you'd love to improve, or necessary renovations, many real estate agents and buyers simply move onto the next house. But it doesn't have to be that way. The FHA option called the 203k can help you finance the remodeling right into the loan. This means it's not a second mortgage or a home equity loan - it's all in one loan, one payment, one deal.
5. Lower mothly insurance premiums. Most mortgage options out there today require some kind of mortgage insurance. This is in place to help protect lenders from the damage caused by the foreclosure crisis. FHA loans typically have lower premiums when compared to other choices.

Now, FHA loans are not the only option for the first time home buyer. In fact, for some buyers they may not be the best option. The best thing for you to do is talk to mortgage consultant about your options, and the best fit for your home buying situation.

Until then, learn more about FHA loans and other home buying options available to you with our free eBook. Download "The Only Mortgage Loan Options Guide You Need" at the button below.