Looking to buy a home for the first time, but having a rough time getting a loan approved?
You may be able to get assistance through the FHA’s Mortgage Insurance program.
What is the FHA?
FHA stands for the Federal Housing Administration. The FHA is a branch of the Department of Housing and Urban Development (HUD).
FHA has a number of functions, but one of the primary ones is to dispense the government’s official mortgage insurance for first time home buyers.
How can mortgage insurance help you get a loan?
As a first time home buyer, you are seen as a big unknown, and therefore a possible risk, by most lenders. They have no idea how you’ll treat the home and if you’ll keep up with your payments.
When a lender encounters a complete unknown, they are most likely to pass over you and wait for someone with a stable record—unless they have some kind of assurance that they will be paid.
FHA’s Mortgage Insurance program covers new home buyers with good credit standing so that the lender will have this security. This makes the lender look at you in a different light; since the government has agreed to back you as a good investment, the risk is removed for the lender, and they may be willing to give you a chance.
Again though, your credit is crucial and the government will not back you if you have bad or no credit, so work on building good credit before you try to get into the FHA Mortgage Insurance program.
What kinds of mortgages can you get insurance for? The most common program is 203 (b), which is for new homes, but there are a number of others, including program 234 (c) for condominiums.
House or Condo
The house or condo which you are applying for insurance for will have to be your primary residence, and for each type of home, there are more specific guidelines which you will have to explore.
What else can you do to make it easier to buy a home in the recession? Along with procuring FHA Mortgage Insurance, you can look into zero down payment homes, in particular those in rural areas.
The USDA 100% Financing Program is a great way to get a new home in a rural spot. Since these areas have emptied out, there are incentives for buyers to repopulate them, like zero down payment and lower closing costs.
Many of the homes in rural areas are cheaper than homes in urban areas too, so you’ll have less to pay in the long run.
Things are tough in the recession, but you don’t need to become discouraged if you are a new home buyer in good credit standing. Lots of other people are in your position, and it’s to the benefit of the government and lenders that you buy a home.
It helps the lenders, bolsters the economy, and therefore is good for the government too. That’s why incentives like this program are in place. So check into it and see if you can buy a new home today!