With sub-prime loans gone in the market, many first time buyers are left with questions about what is the best option for them.
While FHA mortgages haven’t been as popular in recent years because of the perceived amount of bureaucracy associated with obtaining a loan guaranteed by a government entity such as the HUD, new legislation is in the works to help make them more consumer-friendly.
FHA fixed rate loans are the most popular programs for many home-buyers because unlike an adjustable rate mortgage, your payment will stay the same for the duration of the loan.
When purchasing a home, an FHA loan is often the right choice, especially true if any of the following are true:
First Time Home Buyers in Austin
First time home buyers represent a large share of the lending market, especially in Austin where the real estate market has expanded so much in the recent years.
Many do not have established credit histories or a lot of money to put down for a down payment (because they are usually fresh out of college or still early in their careers), so an FHA loan is usually the best option.
Another great feature is that since FHA loans require only a small down payment, and allow the seller to pay up to 6% of the purchase price towards the closing costs, you can often buy a home with as little as 2% down since your Earnest Money can be applied to your funds to close. Keep in mind you still have to show the bank you have the 3% for the down payment.
The best advice we can give when it comes to buying your first home is to educate yourself with the process.
The Home Buying Process
Knowing what’s involved when buying a home is important because it’s sort of like a map of where you’re starting, and where you should end up.
The FHA Loan Process
In addition to knowing how the home buying process works, the FHA loan process is also important.
Here are all the steps involved:
- Apply – apply with a loan officer to get pre-qualifed.
- Issue – if pre-qualified, you’ll get a pre-qualification letter.
- Gather – get your documents together to finish up the application.
- Find – find a home and get under contract.
- Order – all 3rd party services such as appraisal are ordered by the lender.
- Process – loan gets processed and prepared for underwriting.
- Underwrite – verifications are done to formally approve or deny the loan.
- Satisfy – send in any remaining items that need to be satisfied by the underwriter.
- Clear – loan gets cleared.
- Close – you close on your new home!
Getting Pre-Qualified Before You Home-Hunt
One of the biggest mistakes that people make is starting to look for homes before they actually have the financing lined up.
If the lending side of things aren’t lined up, not only can it lead to frustration if things go wrong, but more importantly, it can also cost you money.
By knowing how much you can get approved for to finding out answers to all the questions up front, you can be one step ahead of the home buying process.
Take a few moments to get pre-qualified now – it’s quick, easy and takes less than 30 seconds.