Many people want to buy a home but between the down payment and the closing costs many people just cannot afford to buy a home. It is something that has plagued the home loan industry for years, but when you have an FHA loan you will find that you can pay very little to get into your dream home. With a loan that is insured by the Federal Housing Administration you have several things on your side that make the process of getting into a new home more affordable. When you look into this type of loan you may find that you can spend as little as a month or two of rent to get into your new home, or less!
Step into Your New Home Affordably with an FHA Loan
With an FHA loan you will find that you don't have to pay as much in closing costs as you would if you were closing with a conventional loan. Why is this? It's simple, actually. With an FHA loan there are restrictions and limits on what sort of costs can be added into the closing costs. What this means is that the lender, the broker, and the realtor do not have carte blanch to charge you for anything and everything that they can think of so they can make more money off of your purchase. Instead, they have to keep things honest and legit and the restrictions and limitations ensure that you are only paying what you are obligated to pay, and nothing more. These limitations can help you reduce closing costs from the tens of thousands of dollars to just two or three thousand dollars!
In addition to the limitations on closing costs, the FHA also allows for the seller to contribute as much as six percent to the borrowers closing costs. What this means is that if you are working with a seller who really wants to sell their home and they want to make it as quick and painless as possible, they can kick in some of their profits and help you pay for the closing costs. So, if you had closing costs of $6,500 and the seller wanted to contribute six percent of the costs on a $100,000 home they would be paying $6,000 of your closing costs so you would only need to pay $500 in closing costs. Many buyers will not contribute this much but they will offer four or four and a half percent or something like that.
What is different about this is that when you are working with a conventional loan the seller is limited to contributing 3% to the borrowers closing costs. You would be surprised how many sellers are willing to contribute more than the 3% to the buyer when they are able because they just want to get the home sold and they want to be done with the whole process of selling their home. Being able to accept these contributions of more than 3% from the seller can help to make the purchase of a new home much more affordable for the average home buyer. The difference between the three and six percent is $3,000 and at the end of the day that is a lot of money when you are trying to keep the costs of your FHA loan to a minimum.
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