FHA is a mortgage where PMI is subsidized by the Federal government. Most major mortgage companies offer it. Although the program is often utilized by first time home buyers, it is not restricted to them. This article provides Portsmouth NH FHA Mortgage Overview and pre-approval recommendations to help you decide whether it is a mortgage that you should consider.
Positive Features Of FHA Programs
There are a few important positive features of FHA programs. The required down payment for FHA mortgages is 3%, which accommodates home buyers who do not have a lot of savings. They also allow buyers to receive funds for down payment and closing costs as a gift from a family member. An additional advantage is the simplified refinancing process. It allows a refinance to a lower interest rate without needing a current appraisal, which is useful if loan rates and home values both decline. The loans are also assumable, meaning that a buyer may take over the loan at the existing interest rate. This can help when interest rates are high. Lastly, FHA does not discriminate against credit scores. Although buyers must still have a minimum score, below average scores will not result in higher interest rates.
Disadvantages Of FHA Financing
There are disadvantages of FHA financing to note. The mortgage insurance (MI) is typically higher than a conventional loan. There is an up-front large fee and a recurring fee due with each payment until the loan is paid down below 80% of the purchase price (or updated appraised value). For condominium purchases, the condo building must meet certain requirements such as minimum reserves and sufficient owner occupancy rates. Converted multi-family buildings and duplexes are therefore unlikely to get approved. Single family properties must also meet certain requirements geared towards safety concerns.
FHA Pre-approval Recommendations
Before applying for a pre-approval, pull your credit score and correct any issues. Also obtain important financial documentation such as bank statements, tax filings from past years, recent pay stubs, and investment account statements. Underwtiters will typically ask for a copy of these documents. Ask a mortgage professional to receive estimated monthly payments (based on a specific home price and your financial qualifications) and closing costs before proceeding too far in the process.
Portsmouth NH FHA Mortgage Overview
FHA makes a home purchase easier for certain buyers who may otherwise not be able to get a mortgage. It may also make refinancing or selling a property easier if rates significantly change. However, it does have higher fees and property-specific requirements, so not everyone can or may want to use an FHA mortgage. Speak with an FHA mortgage professional to better evaluate this program.