An FHA loan is a home loan program that enables first-time homebuyers to fulfill their dream of having a home. Backed by the Federal Housing Administration, FHA loans can sometimes open doors for first-time homeowners and those with lower credit scores. Even if you don’t have much cash and can only make a down payment as low as 3.5%, you can apply for this home loan program.

However, before you apply for an FHA loan with 3.5% down payment, read this to be familiar with some significant facts. 

  • Easy to qualify 

Purchasing your first home can be financially daunting, mainly if you are young and haven’t had saved a lot for making a handsome down payment. As an FHA loan program is secured, it helps ease the process. And so, it is the most convenient home loan option when it comes to buying a starter house. Residents in a disadvantaged neighborhood or those who have a less-than-perfect credit score can also qualify for an FHA mortgage loan easily than for a traditional loan program. If you are confused or wondering how much home you can qualify for, then calculate it easily by using a custom-designed mortgage calculator for the FHA Loan program by visiting and clear your doubt.

  •  Low or no closing costs 

Closing costs including inspections, appraisal fees, credit reports and broker commissions can really add up. However, these costs are really lower with an FHA home loan program. The costs may even be covered by the selling party, such as the builder, as an incentive to purchase. Consult with your mortgage lender to determine what closing costs you may be responsible for.

  • Two-part insurance 

FHA home loans include two separate insurance premiums. The upfront premium that is paid when you get the loan, is 1.75 percent of the total loan amount. And the second premium is the annual premium. Depending on the size of the loan, its length and the initial loan-to-value ratio, this amount varies. The LTV ratio is a comparison between the value of the home and the value of the loan. A lower LTV ratio equates to less risk for the lender and so, lower interest rates. The annual premium is paid monthly. 

  • FHA approved lenders 

The Federal Housing Authority does not offer the actual loans; it simply insures the funds. Being a homebuyer, it simply insures the funds. You should obtain the mortgage from an FHA-approved lender. However, you should keep this in mind that there is no uniformity between these lenders, so aspects like costs, interest rates, and services can vary. Although interest rates for the FHA loans are generally lower than conventional mortgages, it is still good to shop around to make sure you are receiving the best value. 

To sum up, consider this real-life example, where a house was sold on 12/13/2019 at 10026 Lynnwood Dr, Baytown, TX 77521 for $225,000 with 4 bedrooms and 3 bathrooms and the size of the home is 2,222 Sq Ft. With an FHA home loan program, the down payment would be only 3.5% or $7,875 and the loan amount is $217,125 and the cash to close including closing costs could be $5,603.75. 

So, without waiting any more, opt for a reputable FHA-approved mortgage lender and apply for the loan today. 

Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on  2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.

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