Can anyone please explain how it works? Every explanation I find online seems so complicated and/or just wants to direct me to a lender. I just want to understand, not waste mine and a lender’s time :’)
Let’s say a potential house you’re interested in is listed for $200,000, if a hypothetical helps explain.
In: 8
Not a lender, am a realtor. Here’s what I tell my buyers;
Don’t confuse FHA and “first time home buyer loan.” They are not the same thing. FHA is a program that is popular with first time home buyers as it allows for a 3.5% down payment and good interest rates. Down payment and affordability are generally a home buyers biggest obstacles and FHA is generous in those regards. Relatively speaking any way.
There are specific first time buyer programs but they may run through a local housing authority and not be offered by all banks/credit unions/mortgage companies, etc. For example I’m in Rhode Island and we have Rhode Island Housing and they have programs that they only offer to people who have never owned a home. In some cases I believe they even have some only available to people whose parents never bought a home either. These are pretty specific and, sorry to say, your only way to learn about these is to contact a lender in your area.
The drawback of these loans is they have some additional requirements borrowers and/or their properties must meet. The most common example is a property being purchased with an FHA loan must be in a certain condition, and one thing they typically won’t allow is chipping paint (lead hazard.) They will also not allow missing handrails on stairs/platforms that exceed 30 inches (I think) in height.
How do they work…you meet with a lender, they approve you, and then you find a realtor and go buy a house.
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