An FHA home buyer's loan is insured by the federal government. The Fair Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD), secures loans that are attractive to first-time buyers because they do not require a large down payment, and credit requirements are not as strict as they are for conventional mortgages. While fees often are higher for FHA loans, the closing costs can be rolled into the total price of the house and included in the loan. Additionally, money for the down payment can come from any source, unlike restrictions on down payments in other types of home loans.
Step 1
Shop around for a loan. Many banks and mortgage brokers offer FHA loans at varying interest rates. You can find a list of local FHA lenders at the HUD website. Once you know how much you can afford, you can be specific in the amount you request.
Step 2
Ask the lender to preapprove you for a certain amount of mortgage. To get preapproved, the lender will need to see copies of your income statements and check your credit history. With a preapproval amount, you are in a better position to negotiate when you find the house you want to buy.
Step 3
Get a real estate agent or look at houses on your own. A Realtor can save you time by qualifying the features and locations you are interested in and narrowing your search. A Realtor can also set up appointments for you to see houses.
Step 4
Look for home insurance that you can afford. The insurance company coordinates with the lender to roll your insurance payments into your monthly payment. FHA loans are covered by the same kinds of home insurance as houses bought with conventional mortgages. The home insurance covers the dwelling and not the loan.
Step 5
Make an offer on the house either directly or through your real estate agent. Get the home inspected and fill out all the offer forms. Once the offer is accepted, you can return to the bank where you were preapproved. Begin the paperwork to purchase the house. Bring your down payment to the lender and let the bank or mortgage company contact an attorney to set up the closing.
Step 6
Sign the papers and get the keys.
Tips and Warnings
- FHA loans can be used to buy a house that needs fixing. The costs of the upgrades often can be rolled into the total mortgage.
- Without a Realtor, you may run into contract issues, inspections and other legalities that may be unfamiliar to you. For first-time buyers, a Realtor can help you negotiate the price and take care of all paperwork involved in buying a home.
Member Comments