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Considering Buying a Home? Think FHA!

Aug 10, 2008
If you are considering purchasing a home, but you are having problems coming up with the necessary down payment, then FHA has your answer. FHA loans were once only considered for low to moderate income individuals, this however is not the case. If you are buying a primary residence and you want to put down a small down payment with great rates, then FHA is your answer. If you would like the idea of having someone else help you pay your mortgage payment or to buy an investment property like a duplex or triplex, you can still use an FHA loan for this transaction, however you must occupy one of the units for at least a year as your primary residence. Also with 2-4 unit properties, you can use the rent income from the property to help you qualify for the loan. This is great for the entrepreneurs/investor at heart as you can on the road to wealth even faster.

Typically the down payment requirements for an FHA loan will be 3-5% of the purchase price of the home. Now this down payment doesn't necessarily have to come from you, it can be a grant, gift from family and even sweat equity. Most people opt for the down payment assistant grant that can cover up to 5% of your down payment, so think there weren't anymore No Money Down Mortgage Loans? Think Again!

Now let us talk about other benefits to getting an FHA loan:

- FHA loans are fully assumable, now what does this mean you the home owner? Well went and if you decide to sell your home, the buyer does not have to qualify for a new loan but instead take over the current FHA loan on the property. Talk about have a great selling advantage, and also since FHA loans come with low interest rates, so selling especially when current interest rates are high will be an ease and you can demand your asking price whether it's a buyer's or seller's market.

- FHA loans allow the seller to pay up to 6% of closing cost, which will more than cover all your closing cost for buying a home. Now if you don't have a seller that is willing to do this then you can simply roll these costs into the loan, which will greatly reduce you out of pocket expenses at closing.

- If you decide to refinance in the future to reduce you rate or to get a shorter term mortgage, then there is no qualifying for the new loan as long as you have made you payment on time for the last 12 months. They don't even require a new appraisal.

- Do you have less than perfect credit such as bankruptcy or foreclosure, then, FHA is the loan for you. As long as you can demonstrate you had extenuating circumstances and that you have developed a good track record since these incidents, normally a 1-2 year window, then you can qualify for low single digit interest rates and a low down payment.

Ok I am telling you all the benefits and I know you are saying it might sound too good to be true or what are the disadvantages?

There is one major disadvantage or to a certain extent called MIP (Mortgage Insurance Premium. MIP protects the lender in the event you can't make you mortgage payments and it usually about 1.5% of the loan amount.

FHA has helped many renters realize the dream of home ownership for many years now. I want to caution you to not just by a home because you can get in with little or no money down or because you found a great deal, such as a foreclosure. Research shows the borrowers that put little or no money down are more opted to end up in foreclosure. So budget carefully, prepare for the worst and try and be debt free before buying a home.
About the Author
Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in mortgage loans for people with Bankruptcies, Foreclosure or with other credit issues, as well as Commercial Mortgages. If you would like a Free Copy or to get instant access to the remainder of this Insider Mortgage Report, please visit http://www.specializedfinancialsolutions.com/own-a-home.htm or Call 954-678-5796
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