Question:
“What’s the advantage of getting an FHA loan? And is that only for first-time homebuyers?”
Answer:
Good questions! I’ll take the second one first:
Contrary to somewhat popular belief, there’s no requirement that you be a first-time homebuyer to use an FHA loan.
FHA loans are generally easier to qualify for, and specifically to qualify for a higher price. That’s because…
- You need not have as much credit history as other loans
- You can receive part or all of the down payment as a gift
- The seller may pay your closing costs up to 6% of the purchase price. That’s more than other loans
- FHA loans allow up to a very high 60% DTI or “debt-to-income ratio.” In plain English, that’s the percentage of your income that goes toward long-term debts, like loans, credit cards, etc.
The downside of FHA loans is that you must pay a relatively high amount of mortgage insurance.
