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FHA Loans: Good Choice for First Time Home Buyers? - YouTube
Channel: Scott Wynn is Lending a Hand
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f h a first home for
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all first home assistance
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what does fha stand for and is fha a
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good loan program or a good choice for
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first-time home buyers
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that's what i'll answer for you right
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now you want to buy your first home but
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maybe you don't have 20
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to put down or perfect credit that's
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okay
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if you're committed to a home purchase
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then i'm here to help you do just that
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maybe even sooner than you thought
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possible my name is scott wynn
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and i am a licensed mortgage advisor in
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colorado with the win
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and eagan team at citywide home loans if
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you want to buy a home in the next 12
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months
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then click that subscribe button and
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together we'll make it happen
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so fha it actually stands for
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federal housing administration no
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it doesn't stand for first home anything
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what it stands for is
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federal housing administration what's
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interesting about the fha
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is that they don't actually offer loan
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programs but
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rather mortgage insurance see without
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fha and the mortgage insurance that they
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provide
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to mortgage lenders there wouldn't be a
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low down payment option available to you
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as a first time home buyer
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see the risk would just be too high for
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a mortgage lender to take to offer a
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down payment as low as fha
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allows without fha or mortgage insurance
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you'd have to have at least a 20 uh down
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payment in order to be able to buy a
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home
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and that was actually the case prior to
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hud
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implementing the fha mortgage insurance
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program
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that allowed for lower down payments the
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nice part is is that with fha
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you can buy a home with as little as
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three and a half percent down
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but i guess i'm getting a little bit
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ahead of myself so today
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i plan to answer the question of whether
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or not fha
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is a good program for first-time
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homebuyers like yourself
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so i guess we kind of have to go back a
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little bit and say what's unique
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or special about first-time homebuyers
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or what is it that a first-time home
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buyer wants in
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a home loan well the first thing that
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comes to mind is that
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generally i would say first-time buyers
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are younger
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younger in comparison to move up buyers
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see according to the national
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association of realtors
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who did a study of first-time home
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buyers what they found is
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is that 88 of the home buyers
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aged 22 to 29 and 52
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of those in their 30s were first-time
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home buyers but
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what does this have to do with mortgages
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and specifically fha mortgages
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well it has to do with credit see about
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50 percent of your credit
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score is based off of the history of
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your credit
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well the younger you are the less
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history you have
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so 35 of your credit score is based off
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of your payment history
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and 15 of your credit score is based off
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the length of that history
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so the less credit history you have in
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terms of
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payments made on time as well as the
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amount of time
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that you have as far as history logged
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on your credit report
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the lower your credit score will be this
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doesn't necessarily mean you're not
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going to have good credit or even great
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credit for that matter
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but it does mean that if you were older
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and had
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more history you would likely have a
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higher credit score
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so again what does this have to do with
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fha right fha
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doesn't have as much of a hit to those
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with lower credit scores
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in comparison to loan programs like
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conventional financing as an example
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so let's take a look when you qualify
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for an fha loan you automatically
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qualify for the mortgage insurance that
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comes along with it
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and what's interesting about fha's
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mortgage insurance is that it doesn't
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change based on for your credit score so
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it doesn't matter if you have a 600
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credit score or an 800 credit score on
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fha with minimum down payment 30-year
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fixed your mortgage insurance rate
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is 0.85 percent conventional financing
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on the other hand doesn't even allow for
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loans below
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a 620 credit score so we couldn't even
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offer mortgage insurance
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or a loan for that matter for somebody
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who has a credit score in the 600s
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but if we look at let's say 620 as an
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example
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you'll see on this chart here that the
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mortgage insurance is
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1.86 or over double that of fha
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basically it's like having a one percent
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higher interest rate
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in comparison to fha at a 620 credit
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score looking at this chart you can see
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that you have to get all the way up to
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about 720 to get to that similar mi rate
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on a standard conventional three percent
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down
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loan option so what else does younger
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have to do with
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uh buying a home and getting a mortgage
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well a big part of it is just
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time time to save money for a down
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payment right
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so you probably don't have twenty
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percent down which is why you're
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interested in taking a look at the
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different options and why fha may be a
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good choice
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and one of the major reasons is that fha
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only requires a three and a half percent
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down payment
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and the nice part about fha is there's
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no special requirements in order to get
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that you don't have to be a first home
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home buyer you don't have to be under
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any particular income limits or anything
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like that
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fha's minimum down payment is three and
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a half percent in comparison to standard
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conventional financing which is five
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percent
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somewhat related to time to save is that
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being a first-time homebuyer
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means you haven't had the opportunity to
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own a home and
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owning a home provides some benefit
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in terms of housing appreciation right
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that you buy that home and each year the
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home is going to go up in value which is
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building equity and therefore
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net worth so for the non-first-time home
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buyer who's going to sell their home and
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purchase the next home
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a large portion of their down payment if
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not all of their down payment is going
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to come from the equity of the home that
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they're selling
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as a first-time homebuyer you don't have
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that opportunity which is another reason
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why fha and the minimum three and a half
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percent down payment is going to be a
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great loan option for you
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one thing a lot of first-time homebuyers
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find helpful is that fha provides
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the opportunity to use gifts for down
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payment
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now there are certain restrictions
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associated with who the gift can come
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from
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and generally it's going to be from
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those people anyway so it's going to be
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somebody that's related to you like a
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parent
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or a sibling someone like that and so
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that's one nice part about fha financing
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is the ability to utilize
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gifts to cover any down payment and
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closing costs that need to be paid for
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at the time of closing so all of this
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begs the question is fha
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better than conventional financing
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specifically for
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first-time home buyers well the answer
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is it depends
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and it depends off of your particular
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situation if you have a 720 credit score
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and 5
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to put down then fha may not be the best
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loan program for you conventional may be
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better
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if on the other hand you have a credit
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score let's say under 680
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and would prefer a down payment less
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than five percent
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then fha may be a good option if you're
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a high income earner but you don't
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necessarily have a lot of cash to put
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down or don't want to put the cash down
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then fha may be the best bet but i'll be
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recording a video soon about
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conventional first-time homebuyer
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programs and specifically why you might
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want to select a conventional loan
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when purchasing your first home so keep
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an eye out for that
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so there you have it fha federal housing
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administration
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and why i think it can be a great loan
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program for many first-time homebuyers
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did i answer the question you came
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looking for if not leave your question
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in the comments below and i'll be sure
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to reply
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and if you found the info helpful i'd
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love to click on that like button
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if you're serious about making your
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first home purchase then i've got a ton
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of great info for you to help make that
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possible
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check out these other videos as you work
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towards buying a home
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or you can call or text me and i can
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help you directly
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