Question: Are FHA loans only for first-time home buyers?
Not at all. The Federal Housing Administration provides financing for low- and moderate-income buyers, but there is no maximum income for buyers or requirement that they are first-time buyers.
FHA has become a useful choice for many buyers whose credit situation might make conventional financing more difficult and more expensive.
FHA loans today require a minimum down payment and mortgage insurance for the life of the loan. Although it is not a first-time buyer program, it is very popular with these buyers, partly because many communities offer down payment and closing cost assistance for qualified first-timers, whose income falls beneath certain limits.
FHA is also an excellent choice for those buyers whose credit scores are at the lower end of the scale. Whereas conventional loans require a minimum FICO score of 620, FHA accepts scores much lower. Contact your lender for specific terms or to apply for an FHA loan.
What is the disadvantage of FHA Loans?
Handling of mortgage insurance (MI) is probably one of the potential disadvnateges of an FHA loan. Lenders require mortgage insurance to limit their risk any time the loan is for more than 80% of the property’s value. With a conventional loan, a borrower can ask the lender to remove the MI. It’s done once they can demonstrate that the loan is less than 80% of the property’s value. With FHA, the mortgage insurance will be in place for the life of the loan. Borrowers pay MI in two ways. First, there is an up-front premium that’s added to the loan. Second is a monthly premium that is also added to the payment.
FHA loan calculations can be a little tricky to explain in this medium so you should absolutely reach out to a trusted, licensed lender to better understand or apply for an FHA loan.