Wednesday, January 8, 2014

FHA Mortgage Program: Popular Among First Time Home Buyers


The FHA mortgage program has become a very popular mortgage program with first time home buyers.  Home buyers do have many options with mortgage programs when looking to get pre-approved, but the FHA program has become the most popular.
There are many reasons why the FHA program has become very popular among first time home buyers.  Here are some of the great benefits why the FHA mortgage program is great for home buyers.

Credit Score

The minimum credit score allowed with most lenders is a middle score of 640.  It’s very common that home buyers don’t realize they have a good enough credit score to qualify for the FHA mortgage program.  The lower credit score that is allowed opens up the opportunity for many first time home buyers to qualify for a mortgage.

Down Payment

The minimum down payment is only 3.5% of the purchase price.  The down payment can even be gifted funds from a family member.  Many home buyers didn’t know the down payment can be gifted.  Home buyers can even use the funds from a 401k retirement account.

Interest Rates

The interest rates for the FHA mortgage program are very low.  We have been seeing the FHA interest rates lower than most conventional mortgage rates, when comparing 30 year fixed rates.  These lower interest rates keeps the total payment lower for home buyers, which allows them to afford more of a home.

Debt to Income Ratio

The debt to income ratio allowed is higher with the FHA program versus a conventional program.  The debt to income ratio is the total monthly payments, including the new mortgage payment, divided over the total gross monthly income.
Example:  The new mortgage payment total is $1500, plus an auto loan payment of $300, plus a credit card payment of $50, gives you a total monthly debt of $1850.  The total monthly income, before taxes, is $5000.  1850/500 (total debt/total income) = 37%.
The FHA program lenders allow up to 55% debt to income ratio percentage, where a conventional mortgage only allows up to 45%.
These benefits have made the FHA mortgage program the most popular program among first time home buyers.


To receive personalized rates please email me at eneal@athccorp.com with your available times to discuss your options.