FHA loans remain the most popular mortgage option for first-time home buyers in 2023. Offering lower down payments and flexible credit score requirements makes them especially appealing to first-time homeowners. New FHA Down Payment Assistance programs have recently emerged to provide even more assistance to homebuyers. Let’s take a closer look below.
For those FHA borrowers who may not have the necessary funds for a 3.5% down payment, FHA Down Payment Assistance is often available depending on location and eligibility factors. FHA Down Payment Assistance (DPA) gives borrowers additional funds to cover the cost of their down payment and closing costs. This can be beneficial because it allows borrowers to purchase a home without having to save for a large down payment.
First, it’s important for homebuyers to understand when they read a mortgage program requires a certain percentage down payment, whether it’s 3%, 5%, etc, that does not include the closing costs and advance escrow payments for taxes and insurance. These closing costs & escrows normally total an additional 3-5% of the purchase price depending on the market. So if a program calls for a 3.5% down payment like FHA, the actual total when factoring in the closing costs will often be closer to 7-9% of the purchase price.
Down payment assistance is available for many eligible FHA loan borrowers, allowing them to receive non-recapture grants and/or deferred low-interest rate loans that can be used toward their down payment and closing costs. These grants are typically offered by state and local governments, as well as non-profits and other organizations. FHA down payment assistance programs can help make home-buying more accessible for those who may not have the resources to cover the down payment on their own.
* Florida first-time buyers will want to learn about the Hometown Heroes Loan Program. This 0% deferred second mortgage offers assistance (5% of the loan amount, up to $35,000) for the down payment and closing costs for those employed by any Florida-based company. Eligible buyers can obtain 100% financing for either FHA or Conventional loans.
Before applying for FHA loans or any other loan products, it is important to review your personal financial situation and goals, as well as research all available options for the best fit. The options available to you will depend on many factors including:
- Property Location (County/State)
- Household Income
- Property Type
- Credit Profile
FHA mortgages help provide a path to homeownership for many first time buyers who have often been restricted due to stringent loan requirements. Additionally, FHA down payment assistance programs provide an extra resource that can make the process of buying a house more obtainable.
FHA loans are an attractive option for many buyers due to their flexible credit requirements and low interest rates. Lenders are often more lenient when it comes to approving borrowers with less-than-perfect credit.
To qualify for an FHA mortgage, buyers will need to meet certain criteria such as providing proof of income and employment stability, property location (county/state), household income, property type (single-family residence or condominium), credit profile, and other factors.
Additional FHA Benefits Include:
- Lower minimum down payment requirement compared to other basic FHA loan options
- Lower FICO® credit score requirements
- Home seller concessions for closing costs are permitted
- Reduced mortgage insurance costs
- Single-family, townhomes, FHA-approved condos, and mobile-manufactured homes are permitted
- Loan limits up to $498,257 in most locations, even greater for select high-cost areas in Florida, Atlanta Georgia area, etc.
For more information about FHA down payment assistance programs, please connect with us by calling the number above, or just submit the Info Request Form found on this page.