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Should I Get an FHA Loan?

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FHA loans are available to first time homebuyers. The program is set up to lower the down payment requirements. When you take out an FHA loan, the government is backing up the loan or guaranteeing it. They will do this with the 203(b) mortgage insurance. FHA loans allow you to borrow up to 96.5% of the cost of the home. They also have guidelines about the amount you can borrow in each area to purchase a home. If you are considering an FHA loan, you may also want to check into the housing program offered by the USDA Rural Development program. Your local county or state government may offer additional programs to help you purchase your new home. Take the time to research all of the possibilities.

When you apply for an FHA loan, you will go through a normal mortgage provider that offers FHA loans. The loans are designed to help those that may not have as high of a credit score or who may have a difficult time saving up for a down payment. The down payment can come from a gift or other source. It is important that you completely understand the terms of the mortgage that you are signing up for, since you can qualify for a FHA mortgage that is an adjustable rate mortgage (ARM). It is best to steer clear of ARMs since they will adjust up over time.

While it may appear to be a good idea to buy a home with an FHA mortgage, you need to carefully consider all of your options before you go this route. One of the reasons you should save up a down payment on your home is to prove to yourself that you are ready to take on the additional financial responsibility of home ownership. You need to create a budget that includes the cost of your homeowner’s insurance, house payment, extra money for house repairs and taxes. Once you do this, you will be able to determine if owning a home or renting is better for your situation.

Just as with a traditional mortgage, you should only buy if you are planning on staying in the home for at least five years. You should make sure that your total house payment is no more than twenty five percent of your pay. You should also work to make sure your total debt payments (including cars, home, and credit cards) are less than thirty percent of your total take home pay. This will protect you from overextending yourself once you do buy a home.

Once you do buy a home, you will need to set up a sinking fund for home repairs. You are now responsible for paying the plumber or replacing the air conditioner when it goes out. This needs to be a part of your monthly budget. You should also save up to pay for an remodeling you want to complete on your home. You do not want to go further into debt to make changes in your home. If you bought the house with plans to renovate, you should be sure that you have a solid budget in place and took that into consideration when purchasing the home. You should also plan for unexpected costs associated with moving. 

If you feel like you will never be ready to purchase a home, you may want to look into other programs to see if you qualify for help. Habitat for Humanity may allow you to qualify to buy a home through sweat equity. You may also want to change the type of home you are looking to buy. You may find a better deal if you purchase a foreclosure or a home in need of some cosmetic repairs. If you go this route, you need to be sure that you can afford to make the repairs as well as purchase the home. You may need to work on getting out of debt for a few years before you purchase a home. Home ownership can be a negative experience if you are not ready to take on the additional financial responsibility of a home.

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