Federal Housing Association (FHA) loans are popular among first-time homebuyers, but they can also offer tremendous value to repeat homebuyers, given the right circumstances. If you're looking to buy again, it can be difficult to decide whether or not an FHA insured loan is the right solution for your situation.
Here are five things repeat homebuyers should know about FHA loans.
1. What is an fha Loan?
FHA loans are mortgage loans insured by the FHA. They are designed to help homebuyers secure financing for a new home, while reducing the risk to mortgage lenders by providing them with insurance against borrowers who default on their mortgage payments. Simply put, FHA doesn't actually make loans. Instead, it insures loans so that if buyers default for some reason, the lenders will get their money.2. What are the benefits of an fha loan?
The primary benefits of an FHA loan are the low-downpayment requirement and the low credit score threshold. These two benefits are well suited for first-time homebuyers who may not have built up much credit and cannot afford a 10 or 20 percent downpayment on a house. However, it's important to note that these benefits are not exclusive to first-time homebuyers. FHA loans may be the right solution for some qualified repeat homebuyers, as well.
3. Should i get an fha loan to buy my next house?
Whether or not you should get an FHA loan as a repeat homebuyer depends upon your specific situation. If you have a credit score of 580 or greater and cannot afford a 10 percent downpayment on a home loan, an FHA loan may be the right choice for you. You can still qualify for an FHA loan if your credit score is less than 580, but you will typically need to make a downpayment of at least 10 percent.
4. What are the restrictions for fha loans?
In addition to the credit score and downpayment requirements, your FHA loan may also be subject to the following parameters:
- FHA loans can only be granted for your primary residential occupancy.
- In order to sign an FHA loan, you must be of legal age to sign a mortgage in your state, you must have a valid social security number and you must be a lawful resident of the United States.
- Borrowers of FHA loans must have a steady work history.
- Your mortgage plus your monthly debt cannot exceed 43 percent of your gross income.
5. Do I Qualify for An FHA Loan?
South Dakota Housing Development Authority (SDHDA) offers FHA-insured loans through its First-Time and Repeat Homebuyer programs—in order to qualify for a loan such as this, you need to meet certain criteria.
To meet SDHDA's standards for qualifying for a First-Time Homebuyer Loan you must have:
- Not have purchased a home in the last three years
- A household income within SDHDA's limits
- An intended home purchase within SDHDA's price limits
For those homebuyers who aren't purchasing a first home, the Repeat Homebuyer Program requires certain income and purchase price limits, as well as a credit score of at least 620 to qualify.