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FHA Home Loans >> How it Helps
How Does the FHA Help First-Time Home Buyers?
by Brandon Cornett
What exactly does the FHA do to help first-time home buyers purchase a home? In a nutshell, they make it easier for you to buy a home, and they do this in several ways.
There are two key areas where the FHA can help first-time home buyers. They can help people qualify for a mortgage loan with a smaller down payment, and they can make the mortgage-qualification process easier for the home buyer. So let's talk about each one of these items in turn:
Smaller down payment -- You can put as little as 3.5% down on a home when you buy it using a FHA loan. Without government backing, you would probably have to put at least 10% down, and maybe up to 20%. You can see the advantage for first-time home buyers who don't have a lot of money to put down on the purchase of their home.
Easier qualification process -- The FHA does not make loans directly to consumers. Instead, they insure the loans made by private mortgage lenders. Because of this government insurance against default, the lenders are generally more flexible with their qualification criteria. For example, you can qualify for an FHA loan with a lower credit score than you would need to get a traditional mortgage loan.
These are two of the ways the FHA can help first-time home buyers who are in the market to purchase a home. But there are other benefits to using these loans. You may find that you qualify for a lower interest rate on an FHA loan than you would on a regular / non-FHA loan. Obviously, this can save you a lot of money over the life of your loan, since the interest rate is a key component of your monthly payment.
Another benefit is that it's usually easier to refinance a home purchased through an FHA loan than one purchased without. For example, the government currently has refinancing options available under the recently launched Making Home Affordable program. These refinancing options are available to all kinds of homeowners, but they are easier to secure if you currently have an FHA loan. So those people have an advantage when trying to refinance from their current mortgage into a newer one.
This article addresses the question: How does the FHA help first-time home buyers when they are purchasing a home? If you would like to find answers to similar questions about FHA mortgage loans, please refer to the Q&A library for this topic.
