Did you know first-time buyers who financed their home typically financed 93 percent* of their home in 2020? Many of these new homeowners obtained financing backed by the Federal Housing Administration (FHA), a US federal government agency.
An FHA loan facilitates homeownership for the credit challenged, those with a smaller down payment or not able to qualify for conventional financing. Many first-time homeowners choose FHA. Here is why:
- Down payments as low as 3.5%**
- Fee limits on closing costs
- More lenient underwriting requirements
- Credit scores as low as 620 depending on your down payment
**A down payment of less than 20% is common, so an FHA loan will require an
upfront mortgage and monthly mortgage insurance payments (MIP). A smaller down payment increases the risk for the lender which requires MIP to charge a fee for mortgage insurance. MIP will stay on the loan for the life of the loan. Upon achieving 20% equity in the home, many borrowers refinance to eliminate PMI.
Premia is an FHA, Approved Lending Institution, and is not acting on behalf of or at the direction of HUD/FHA or any federal government agency.
* National Association of REALTORS® | 2020 PROFILE OF HOME BUYERS AND SELLERS, November 2020
Feb 04, 2021