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FHA Loans for First Time Home Buyers

FHA First Time Home Buyer

Learn About FHA Home Loan Programs For First Time Home Buyers.
Easy to Qualify · Low Rates · 96.5% Financing · Fast and Easy Process.

FHA loans have been helping homebuyers in America get the financing they need for almost 80 years. The FHA is a government agency that insures home loans. They do not loan money themselves, but what they do is back lenders in the event that a loan defaults and goes into foreclosure. This backing allows FHA mortgage lenders to issue loans to people who may not qualify for a conventional loan.

How to Qualify / FHA Home Loan Guidelines

The following details are related to qualifying to purchase a home using a FHA loan. It is intended to inform a first time home buyer how to get a FHA loan. If you already have a FHA mortgage, or would like to refinance your current loan into a FHA loan, visit our page on FHA loan refinancing for more information. Below are the HUD/FHA guidelines for getting a loan to purchase a home:

  • Credit Score – To qualify for the 3.5% down payment, you must have a 580 credit score or higher. If your credit score is between a 500-579, you still may qualify for an FHA loan, but will be required to put 10% down.
  • Down Payment – FHA loans are widely known for a combination of reasons, but largely for their easy qualification guidelines and low down payment option. A first time home buyer can purchase their first home and only have to pay a 3.5% down payment. So if you wanted to purchase a home for $200,000, this amount would be $7,000!
  • Owner Occupied: You must occupy the home as your primary residence. The FHA does not insure loans for investment properties, second homes, or vacation homes. You must occupy the home yourself in order to be eligible for FHA financing.
  • FHA Mortgage Insurance – All FHA loans require that mortgage insurance be paid. There are two mandatory types of FHA mortgage insurance applied to all FHA loans nationwide. This includes the FHA Upfront Mortgage Insurance Premium (UPMIP) and the monthly FHA Mortgage Insurance Premiums (MIP). You can calculate how much mortgage insurance will cost with this FHA insurance calculator.
  • Job History / Income – Showing stable job history, especially in the last 2 years is necessary. You must show that you have the financial ability to repay the loan. This includes full-time work, and enough income to be able to afford the new mortgage payment. One of the primary underwriting considerations is the ratio of your debt-to-income (DTI). Lenders like to see a maximum of ratios of 43% DTI ratio. This is calculated by taking the total amount that the new mortgage payment would be, along with other debts such as auto loans and credit cards. It is then compared against your monthly income to calculate your DTI ratio.

Example for DTI: If you may $4,000 a month, the maximum amount your mortgage payment and debts can be is $1,720 (43% of $4,000). This is just a random example. You can use our DTI calculator to get a general idea of what sort of maximum mortgage payment you can have with a FHA loan. The best way to find out precisely how much you can borrow, as well as what your interest rate and monthly payment would be is to actually get prequalifed for a FHA loan.

Click Here to See If You Qualify For a FHA First Time Buyer Loan

Why Use an FHA Loan for Your Home Purchase?

There are a lot of benefits of a FHA loan. Conventional mortgages carry a lot of restrictions and limitations that FHA loans simply do not. So why should you consider financing your home purchase with a FHA loan?

  • Down Payment Gifts – You can borrow your down payment. Most loan programs require that you show you personally have the funds to pay for your down payment, but with a FHA loan you can borrow the money, receive down payment assistance, or a grant.
  • Low Rates – It surprises a lot of people to find out that the interest rates on FHA loans are not only similar to other loans, but often even lower. For those who can qualify for both FHA and conventional, compare the two loans and see which will save you more money. Often, FHA loans provide the lowest mortgage rates to home buyers.
  • Assumability – Something that is more of a benefit than many realize is that FHA loans are assumable.  What does assumability mean?  This means that your FHA loan can essentially be “handed off” or transferred to another qualifying borrower.  This becomes a major advantage in many situations, such as if you want to pass the ownership of your home and responsibility for the loan to a family member, friend, or someone else.  Also, if you want to sell your home at some point, and rates are higher (which can be expected considering how low they are right now in 2019), you can sell the home with the lower house payment. If someone is looking at your home and another home, and they can buy yours with a much lower mortgage payment, this is something that could be major selling point!

Top 5 Questions About FHA First Time Home Buyer Loans:

How long does it take to get approved?
When you apply for an FHA loan, you should have an answer back regarding the status of your loan approval within 24 hours.

Are FHA loans only for a first time home buyer?
No, FHA loans are available for repeat home buyers. In fact, FHA loans for second time home buyers are very common, as well as for people buying a home for the third, fourth or fifth time, etc. You can not have more more than one FHA loan at a time though.

Can I use a cosigner to buy a home with a FHA loan?
Yes, FHA loans do allow a cosigner. A cosigner is someone who helps you qualify, primarily by contributing to the strength of your application (such as lower debt-to-income ratios and also contributing towards credit requirements). It is worth noting that a cosigner is different than a co-borrower. A cosigner shares the responsibility to keep up with the mortgage, but they do not share in ownership rights. A co-borrower has equal responsibility and ownership.

What does the FHA loan process consist of?
The first step is to apply and get an approval. Once approved (or denied if you do not qualify), you will receive an official loan approval with a checklist of conditions that must be cleared before your loan closes. This usually consists of getting an appraisal, submitting income documentation, tax returns, and employment verification. Your credit will already be on file from the application. Some FHA loans require additional conditions depending on the specific borrower and the property you want to buy. The process is very simple and your loan specialist will help you every step of the way.

How much can I borrow with a FHA loan?
The maximum amount that you can borrow (the FHA lending limits) are set at the county level. On the right side of this page, find your state, and then scroll down until you see your county. You will see four columns. This represents the maximum amount you can borrow in your county for each property type (number of units). A 1 unit property is a single family residence. A 2 unit home is a duplex. A 3 unit home is a triplex. A 4 unit home is a fourplex. Don’t see your state listed? We only offer FHA loans in these states. If your state is not listed, you will need to look for another FHA lender in your location.

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Property State

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 Purchase Refinance

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Home Loan Programs Available In:

Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Florida, Georgia, Kansas, Louisiana, Iowa, Illinois, Indiana, Maryland, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming.