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FHA Offers Low Down Payments For First-Timers

posted by Stephen Katz @ 11:58 PM
Monday, March 14, 2011

Except for VA , and a handful of state-sponsored loan programs, 100% loans of the last decade are now gone. For first-time home buyers it is just one more obsticle  to get over in the search for an affordable home loan.

Enter FHA (Federal Housing Administration), the government-backed loan program that has been around for years. For nearly a decade, an FHA mortgage was nearly non-existent, partly because of its own archaic lending guidelines and partly because of 100% conventional loans that FHA could not compete with.

Today, however, FHA home loans represent over 35% of all mortgages originated. Most of the loans are made to first-time home buyers since FHA does not have income restrictions and requires only a 3.5%  downpayment. 

Conventional mortgages require a minimum down payment of 5% or more. Add to that the closing costs which can equal 2% or more of the loan amount, and escrows that tack on another 1% or so and you have a financial barrier the majority of first-time home buyers are unable overcome. Of course you can get sellers to contribute to closing costs and escrows, but that still leaves a sizable down payment that buyers must have in order to purchase a home. 

Lenders need authorization from FHA to make FHA home loans. Some lenders, like large banks, and other “Direct Lenders” are given greater lending authority which gives them more leeway than smaller lenders and mortgage brokers.  There are, of course, other a full set of guidelines to follow with an FHA mortgage, but if a home loan with a low down payment is what is needed in order to buy a first home, an FHA home loan may be your best choice.

Stephen Katz

(770) 309-0939 (direct) or (866) 742-8400 -- For the past 18 years, Stephen Katz has built a successful business almost entirely on referrals. As your mortgage consultant throughout the home loan process, Stephen will explain the pros and cons of all available mortgage programs and help you choose the financing option that is best suited to your needs. Throughout the loan process, he will keep you informed and will respond quickly to your requests with answers and solutions. Consistently a top producer, Stephen is a Mortgage Bankers Association "Diamond" Award winner, a Georgia Mortgage "Top Gun" and has closed almost half a billion dollars in loans. Put his knowledge and experience to work for you!

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