The FHA mortgage is the perfect mortgage for those buyers that do not have a lot of money for a down payment on the purchase of a new home. The minimum down payment required for an FHA loan is 3.5% of the purchase price. The closing costs will also need to be paid by the buyer. However, the FHA loan does allow the seller to contribute up to 6% of the purchase price towards closing costs. If the seller agrees to assist with the closing costs, this information will need to be listed in the purchase contract.
The interest rate for the FHA loan is fixed for 30 years or 15 years. There is mortgage insurance on an FHA loan: upfront mortgage insurance and monthly mortgage insurance. The upfront mortgage insurance is 1.75% of the loan amount, and FHA allows this amount to be financed into the loan. There is also monthly mortgage insurance, which is based on a percentage of the loan amount. The monthly mortgage insurance is paid with your mortgage payment each month. However, the monthly mortgage insurance lowers each year as the balance of the loan decreases but it never completely falls off of the loan.
FHA financing requires the home to pass the 3 “S” Test – safe, sound, and secure. There cannot be any peeling paint, which is typically found on windows and door frames. No foundation or roof issues and utilities must be on at the time of the appraisal. If the items are found to be an issue during the appraisal, often times the items are able to be fixed, and the loan is able to close. Borrowers and sellers just need to be willing to work together to resolve the issues.
Overall, this product requires a minimum of 620 credit score and there is no penalty for paying it off during the term of the loan.
Call Annette or Jayme at Dynamic FCU 419-586-5522 for additional information.