FHA Loans
FHA is a great tool for First-Time Buyers or those with limited down-payment funds. The standard FHA loan requires a 3.5% down-payment plus upfront and monthly PMI. This down-payment must either be cash from savings, cash from a family member or perhaps cash from an employer – the seller is NOT allowed to pay any portion of your down-payment.
FHA says that they offer loans for borrowers with credit score under 600 however, most reputable lenders have additional in-house requirements they lay on top of the government guidelines. Most local lenders now require a 620 minimum mid-credit score.
Closing costs can be slightly higher with with FHA loans (although a portion is rolled on top of your loan) and underwriters always require full income, credit, and employment verifications. FHA buyers must be owner-occupants – investors are not allowed. FHA is not encouraged for properties in need of substantial work or repairs. Because FHA is partially under-written by the federal government these loans can take a bit more time to close with last-minute requests for paperwork; I would recommend at least 45 days in escrow. If purchasing a condominium with an FHA loan, make sure the development is on the FHA-Approved Development List.
