Caroline Bianchi's Blog
FHA loans have long been a valuable resource for Americans who want to fulfill their goal of homeownership but who don’t have the benefit of a lengthy credit history and equity.
If you’re hoping to buy a home in the near future but want to explore all of your options in terms of financing, this article is for you.
Today we’re going to talk about FHA loans and how to know if you qualify for one.
What are FHA loans?
FHA loans are issued by private mortgage lenders across the country, just like regular mortgages. The difference, however, is that an FHA loan is “guaranteed” by the federal government.
Lenders decide your borrowing eligibility, and how much you can borrow, by determining risk. If you don’t have a sizable down payment (oftentimes 20% or more) and you have a low credit score, most mortgage lenders will see you as a risky person to lend to.
When you get an FHA loan, however, the federal government assumes some of that risk, allowing you to secure the loan anyway.
This means you can buy a home with a low credit score, a smaller than usual down payment, and save on some closing costs.
How do I qualify for an FHA Loan?
To find out if you qualify for an FHA loan, you’ll head to the same place as a traditional mortgage--a mortgage lender. Oftentimes, you can simply call or visit the website of lenders to get the process started.
As with all things, it’s a good idea to shop around for a mortgage lender. Their offerings will be largely similar, but there might be minor differences that make one better than another for your particular circumstances.
Down payment requirements
To secure an FHA loan, you will need to make a down payment of at least 3.5%. However, this low down payment comes with a price. You’ll typically be required to pay private mortgage insurance (PMI) fees on top of your accruing interest for your loan.
Credit score requirements
While you can often secure a mortgage with a lower credit score through an FHA loan, there are still some requirements. To secure a loan with the lowest possible down payment (3.5%), you’ll need a credit score of 580 or above.
Previous homeowners and FHA loans
A common misconception about FHA loans is that they are only for first-time homeowners. However, you can still qualify for an FHA loan if you’ve owned a home before as long as it has been three years since you’ve had a foreclosure or two years since filing for bankruptcy.
If you meet these three conditions, you should be able to secure an FHA loan through a traditional mortgage lender.
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While many homes are sold on the basis of emotional appeal or location, there are plenty of other factors which can help tip the scales in your direction. As a home seller, the more advantages and desirable features you can offer to potential buyers, the greater your chances of attracting multiple offers.
If your kitchen and bathrooms haven't been updated for decades, that could easily become a major stumbling block to attracting qualified buyers. Unless their plan is to remodel your kitchen after they buy your home (which is not likely), house hunters are generally not going to look kindly upon old laminate counter tops -- especially those with the ghastly colors from the sixties and seventies! The good news about making your outdated kitchen and home more marketable is that you have the option of resurfacing old countertops rather that completely replacing them.
Although it's generally a good idea to have professionals do this, you can cosmetically improve the appearance of your kitchen countertops by resurfacing them with granite sheets or tile. Resurfacing is also a relatively inexpensive way to help restore aging kitchen cabinets -- another aspect of your home that potential buyers are going to notice.
According to a recent study, quite a few buyers are drawn to features like stainless steel appliances, subway tiles, farmhouse sinks, Shaker cabinets, exposed brick, pendant lights, and quartz countertops. By the way, Quartz does offer some advantages over granite because it's more scratch resistant, maintenance free, and doesn't need to be sealed or polished.
Other features which attract home buyers include energy-efficient windows and appliances, sufficient insulation in attic and elsewhere (many older homes lack this), low-maintenance flooring (not carpeting), roofing that's been replaced within the past decade, finished or semi-finished basements, first-floor/separate laundry rooms, newer hot water heaters (extra points for tankless units), outdoor security lighting, fenced backyards, and dry basements. If you do have issues with excess moisture or leaks in your basement, it may be helpful to install a sump pump, a dehumidifier, French drains, or other dry basement remedies to address those issues before they're brought up by prospective buyers.
While there are certain aspects of your property that can not be changed, such as proximity to neighbors or the school district in which you're located, their are plenty of cost effective ways to improve the appearance and functionality of your home before you try to sell it. To identify problems before they become obstacles, some homeowners hire a property inspector to point out issues. That way, they're not blindsided by unexpected structural, mechanical, electrical, drainage, or energy conservation issues they might not be aware of. In addition to a reputable property inspector, a seasoned real estate agent can also be one of your best advisors when you're ready to put your home on the market.
With closing day rapidly approaching, you're almost to the finish line of your home purchase. However, before you complete your home purchase, you will need to conduct a final walk-through of the property.
Ultimately, a final walk-through offers a valuable opportunity to identify any last-minute problems with a residence. If you encounter any issues during a final walk-through, you can ensure that the seller can correct these problems prior to a home closing.
Preparing for a final walk-through is key. Lucky for you, we're here to help you get ready for a final walk-through so that you can complete a successful home purchase.
Now, let's take a look at three tips to help you prep for a final walk-through.
1. Avoid a Closing Day Walk-Through
When it comes to a final walk-through, it pays to be cautious. Thus, you should give yourself plenty of time to set up a final walk-through. This will allow you to avoid the dangers associated with finding home problems on the same day as a house closing.
Try to schedule your final walk-through at least a few days before you close on a residence. That way, if you discover problems with a house, you can ask the seller to respond to these issues and reduce the risk of a home closing delay.
2. Keep an Eye Out for the Seller's Leftover Belongings
A final walk-through gives you an opportunity to view a house that is virtually empty. But if you find that a seller has left behind various belongings, you should not hesitate to ask the seller to remove his or her possessions.
Furthermore, a home seller should leave a house in "broom-swept" condition; this means a home's walls, floors and other surfaces should be dust- and dirt-free. If you find trash and other debris in a home, you can ask the seller to clean the property.
3. Be Ready to Test All Appliances
A homebuyer may acquire a refrigerator, washer, dryer and other appliances as part of a home purchase. These items often are expensive to replace, and as such, you'll want to make sure they work properly during a final walk-through.
If an appliance does not perform as required, you have the right to request that the seller repair or replace the appliance. Or, you may be able to receive financial compensation for the defective appliance.
When it comes to prepping for a final walk-through, there is no reason to work alone. Fortunately, if you collaborate with an expert real estate agent, you can receive plenty of support in the days leading up to a home closing.
In addition to providing homebuying assistance, a top-notch real estate agent is happy to attend a final walk-through. By doing so, this housing market professional can help you identify any potential home problems and resolve such issues as quickly as possible.
Plan ahead for a final walk-through, and you can avoid the risk of discovering assorted home problems after you close on a residence.