There is no need for you to think wistfully of the days when people could – and did – buy their own house after some years of earning and saving. You can approach the Federal Housing Administration (FHA) to help you get the requisite loan for buying a house if you are a senior citizen or have a low credit rating. This is because the FHA has looser credit score requirements and gives low interest rates to low-credit borrowers. This is particularly true of first-time homebuyers and low-income households. If you have a credit score rating of 580 or more it is possible for you to negotiate a conventional mortgage with a down payment as low as 3.5 percent.
However, if your credit score hovers between 500 and 579, then you would need to make a down payment of at least 10% of the price of the house. Just keep in mind that FHA mortgage in Los Angeles is not a housing loan. It is meant to be an insurance fund, which underwrites loans taken through an FHA-approved lender. Your down payment can be as low as 3.5% of the purchase price when your mortgage is underwritten by FHA, even if your credit score is below 580. Since costs, services and underwriting standards will vary among lenders or mortgage brokers, you want to be certain that you have the best option before you.
Keep Your Debts Manageable
If you are getting a government insured mortgage (FHA or VA), you don’t have to get into a comparison of the FHA MIP or the VA Funding Fee. This is a cost you will be paying. What you really need to do is to keep your debt to income (DTI) ratio manageable. This includes monthly obligations, such as credit card payments, student loans and car loans etc. If your DTI is between 45% to 57%, then negotiating a FHA mortgage could be the only option left to you as you would not qualify for a conventional loan.
The downside of getting your housing loan underwritten by the FHA is that you are stuck with it for the term of the mortgage. In conventional loans you enjoy the advantage of doing away with mortgage insurance after you have repaid at least 80% of the loan amount. However, FHA borrowers are charged an annual mortgage insurance premium of up to 1.35 percent of the average outstanding balances of their loans and the rules require borrowers to pay for mortgage insurance for the life of the loan.
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