Are you ready to buy your first home? You’re in good company. Last year, nearly a third of homebuyers in America were first-time buyers. Overall, about one in seven homebuyers choose an FHA loan for financing. Let’s look at why this mortgage option is so popular.

Flexible Lending Requirements

This makes an FHA loan especially attractive to first-time buyers. Borrowers with limited credit histories, lower credit scores, and lower down payment capabilities may not qualify for conventional loans. But they can qualify for FHA loans. Why? FHA loans are backed by the government, which sets the guidelines for these more accommodating requirements.

Coming up with a down payment (often 20%) can be a roadblock to homeownership for many. FHA loans, however, often require 3.5% of the purchase price for a down payment. Even better, FHA rules allow borrowers to get much of that down payment as a gift from a relative, a close friend, or an approved organization.

Compared to conventional loans, FHA loans allow for higher debt-to-income ratios. This is a huge plus for homebuyers in the early stages of their careers, with the prospect of higher income ahead.

Competitive Interest Rates

FHA loans usually have lower interest rates compared to conventional mortgages, which can mean lower monthly payments and savings over the life of the loan. Why? Because the federal government insures the mortgage. This protects lenders from default, so they can afford to offer lower rates on these low-risk loans.

What about refinancing?

It’s a myth that you’re stuck with the terms of an FHA loan. There are multiple refinancing options with FHA loans. One of the most popular options, streamline refinancing, is a tool designed to lower your interest rate and monthly payment. Some borrowers may qualify for cash-out refinancing on an FHA loan.

What do I need to apply for an FHA loan?

A mortgage lender will want to see several documents to understand your financial situation. These include bank statements, tax returns for the past two years, and your last two pay stubs. Lenders also like to see an accounting of debt and the minimum monthly payments that go toward that debt.

If you’re in the market for your first home, an FHA loan may be the perfect financial fit. To learn more about this popular mortgage option, contact a dedicated member of the Decker Group online or at (972) 591-3097.