3 Things Home Buyers Need to Know
NEW YORK, Jan. 8, 2013 /PRNewswire-iReach/ -- Don't have enough saved up to put 20% on your dream home? That's OK! Amidst all of the mortgage advice you'll find on RealtyPin.com, you've probably seen that you can get an FHA mortgage  just by putting 3.5% down. But before your start jumping for joy over all of the money you're going to save, there are 3 things you need to know about an FHA loan:
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1. You still have to go through a private lender
If you think that getting an FHA loan means avoiding all of the red tape that you get at a "normal" bank, think again! The FHA's job isn't to give out loans. Instead, its job is to insure loans. What's the difference? An FHA loan is written by a private bank, but insured by the federal government (through the FHA). That way, if you default on the loan, the bank isn't out the money. They simply turn to the FHA for the balance of what you would have paid. Because there's virtually no risk for the banks (they're going to get the money somehow - either from you or from the FHA), they're more willing to loan money to people with no credit history or people with less-than-stellar credit. You'll wind up jumping through fewer hoops than if you did things the ol' fashioned way, but rest assured, there will still be plenty of paperwork to fill out!
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2. Your home has to be approved by the FHA
Typically, this isn't a big deal. Most homes that are livable are going to qualify for FHA financing. However, don't assume that any ol' home is OK. In order to actually get your loan, your home is going to have to pass an FHA inspection. Condos can be a little trickier, though - and so can homes that exceed a certain price range. So, before you get your heart set on a certain property, make sure that it actually qualifies for the loan you're trying to get!
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3. You'll have to pay mortgage insurance
You didn't expect the convenience of a lower down payment to come with no strings attached, did you?! When you get an FHA loan, you have to pay two types of mortgage insurance. One is an upfront premium, and one is a yearly premium. Luckily, though, both can be rolled into your loan and paid as part of your monthly mortgage payments. If you plan on getting an FHA loan in 2013, expect to pay more in insurance. That's because FHA loans are so popular that the FHA is now operating in the red. As a result, the insurance rates have just gone up.
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