Getting Your First Home Loan

Those who are looking to buy their first home or are otherwise considered first-time homebuyers may find it difficult to get approved for a home loan. This is because a conventional lender will want 20 percent of the purchase price as a down payment and will have income and credit requirements as well to make the loan.

However, those who are in the market have alternatives to conventional loans. The Federal Housing Administration (FHA) guarantees loans to first-time buyers who are able to put as little as 3.5 percent of the home’s purchase price down. This means that a buyer would have to put down $3,500 to purchase a $100,000 instead of $20,000.

The FHA is also flexible as to where the money can come from. For example, your friends or family could gift you the money for your down payment. You may also be able to use funds from an IRA or 401k to fund your down payment. With a conventional lender, you have to have the money in your bank account ahead of time.

Credit requirements for guaranteed loans through the FHA are also much looser. Those who have gone through a bankruptcy in the last two years may be eligible for a home loan if they are deemed to otherwise be a good credit risk. Credit requirements for FHA loan also make it easy for people with a low credit score to get a loan. As long as your score is above 640, you may be eligible for a loan.

Category: Loans