No offense to my mortgage lender friends, but I think the most boring step for first time home buyers is learning about the types of loans available. For that reason, I’m going to keep today’s discussion about FHA loans short and sweet.
FHA, or Federal Housing Administration loans are the most common loans used by first time home buyers. Below are some important facts about lending guidelines for FHA loans.
- Minimum down payment is 3.5%
- Maximum loan amount is $271,050
- Minimum credit score is 640
- Maximum Seller contributions can be up to 6% of purchase
- Source of down payment can be gifted to you or can be a secured loan
The 3.5% is your down payment only. You will still need to write a check for your earnest money and at closing you will have to come in with money for your closing costs.
Earnest money is the check that will be presented with your offer for the seller’s broker to hold in a trust account until closing. That money is used towards your down payment, but the check will be cashed once your offer has been accepted, so make sure you have the money in that checking account. Depending on the price of the home, the seller and other miscellaneous factors, earnest money is typically $1,000.
Closing costs are the fees the bank will charge to give you a loan. It is typical to ask the seller to help with these costs, which is where “Maximum Seller contributions” comes in. Your Realtor will be discussing this in length when you’re ready to write an offer because more than likely, you will be asking the seller to contribute to your closing costs.
As a first time home buyer, you may face some challenges finding a home that will suit your needs that you can afford. My advice is to be patient and always listen to your lender and your Realtor. If you need help finding an awesome lender, call me!
You should also call me if you need an awesome Realtor! P.S. This is my blog so I can say whatever I want.
Have a super day everyone.