First Time Home Buyer Loans Are Available

For many years, a large segment of society was shut out of home ownership. Young families just starting out were unable to get first time home buyer loans. The main institution created to address this void is the Federal Housing Administration. This department is also referred to as FHA. The mission of the FHA is to help first time buyers get a mortgage.

For a short period many lenders relaxed underwriting standards. In some cases it appeared they were giving out mortgages to anyone who asked. However, those days have come to an end. Lenders have reverted back to old lending standards. Many say that current standards are even more stringent than they had historically been.

There are several requirements which serve to keep first time buyers out of the home market. Most every lender requires a good credit history. Many first time buyers have not had credit long enough to establish a history. This is not to say they have bad credit. They just haven't had enough credit to justify a mortgage. Without a mortgage it is not possible to buy a home.

FHA loans do not require an established credit history. This helps first time buyers greatly. Additional help relates to the down payment. Usually, most mortgage lenders require a 20% down payment. For most any home this translates to thousands of dollars. Many new buyers do not have this amount yet saved. FHA loans are different.

They only require 3% as a down payment. This figure becomes a lot more manageable allowing many first time buyers to realize the home owning dream. Another obstacle which had always been present was closing costs and "points" which are assessed to the borrower. Points are just a fancy word for more money that you have to pay to the lender to get a mortgage.

These costs and points also could add up to thousands of dollars. An FHA loan cuts in half the amount of these fees owed by the home buyer. It further allows the other half to be paid off along with the mortgage over a long period of time. With this obstacle removed the path to a mortgage was opened for many.

Most FHA loans are fixed rate 30 year loans. This allows for predictability of future payments. Your monthly mortgage payment will never change. Some FHA loans now can have adjustable rates. Borrowers need to be careful when selecting these loans and do full research. Failure to do so can result in your mortgage payment exceeding your ability to pay it.

First time home buyer loans are essential to allow all segments and ages of American society to own a home. The FHA program goes a long way to this end. There are other public and private programs to assist first time buyers, however the FHA program is by far the largest. If you are a first time buyer your first stop should be to get information on an FHA loan.