Buying a Home With an FHA Loan in St. Louis

BUYING A HOME WITH AN FHA LOAN IN ST. LOUIS

If you've been thinking about buying a home but feel like you need a huge down payment or perfect credit before you can get started, an FHA loan may be one option worth exploring.

FHA loans are mortgages made by approved lenders and insured by the Federal Housing Administration. They're commonly used by first-time buyers, but **you do not have to be a first-time home buyer to use an FHA loan.**

Here's what you should know before starting your home search.

HOW MUCH DO YOU NEED FOR A DOWN PAYMENT?

One of the biggest reasons buyers consider FHA financing is the lower down-payment requirement.

Qualifying borrowers may be able to purchase a home with a 3.5% down payment when meeting applicable FHA credit requirements. Buyers with lower credit scores may face a higher down-payment requirement, and the lender will determine eligibility based on the complete financial picture.

For example, 3.5% of a $250,000 purchase price is $8,750.

But remember: your down payment isn't necessarily the only money you'll need to buy a home.

You may also need funds for closing costs, inspections, appraisal, prepaid taxes and insurance, and other expenses associated with the transaction.

DO YOU NEED PERFECT CREDIT?

No.

FHA financing was designed in part to make homeownership accessible to borrowers who may not fit some conventional lending requirements.

That doesn't mean everyone automatically qualifies.

Your lender will review factors such as your credit history, income, existing debts, employment and overall ability to repay the mortgage.

If you're unsure where your credit stands, don't automatically assume you can't buy. Talking with a qualified lender can help you understand where you are and what may need to happen next.

FHA ISN'T JUST FOR FIRST-TIME BUYERS

This is one of the biggest FHA misconceptions.

You can potentially use FHA financing even if you've owned a home before.

There are FHA occupancy and eligibility requirements, so your individual situation matters, but being a previous homeowner by itself doesn't automatically prevent you from using an FHA loan.

THE HOME HAS TO QUALIFY TOO

Getting approved as a buyer is only one side of an FHA purchase.

The property also has to meet FHA requirements.

An FHA appraisal considers the home's value while also looking for certain property conditions that could affect health, safety or the property's soundness.

That doesn't mean an FHA home has to be perfect.

However, certain issues may need to be addressed before the loan can move forward. This is one reason having an agent who understands your financing when we're looking at properties is important.

WHAT ABOUT MORTGAGE INSURANCE?

FHA loans generally include mortgage insurance.

There is typically an upfront mortgage insurance premium as well as an annual mortgage insurance premium that's usually paid as part of the monthly mortgage payment.

How long the annual mortgage insurance remains depends on factors including the loan's terms and initial loan-to-value ratio.

Your lender can show you exactly how FHA mortgage insurance would affect your estimated cash-to-close and monthly payment.

CAN THE SELLER HELP WITH CLOSING COSTS?

Depending on the transaction and FHA guidelines, a seller may be permitted to contribute toward certain buyer closing costs.

But that doesn't mean every seller will agree to do it.

Whether requesting seller assistance makes sense can depend on the property, competing offers, current market conditions and your overall offer strategy.

That's something we'll discuss **before** submitting your offer.

FHA VS. CONVENTIONAL — WHICH ONE SHOULD YOU CHOOSE?

There's no single loan that's best for everybody.

An FHA loan might make sense for one buyer while conventional financing could make more sense for another.

Instead of choosing a loan because someone online said it's "better," compare things such as:

• Estimated monthly payment
• Down payment
• Interest rate
• Mortgage insurance
• Closing costs
• Cash needed at closing
• Property requirements
• Long-term cost of the loan

Your lender handles the financing side. My job as your REALTOR® is to make sure we understand that financing when searching for homes and structuring an offer.

START WITH THE NUMBERS — NOT THE HOUSE

It's easy to open an app, see a beautiful house and immediately start imagining yourself living there.

But before we start touring homes, let's figure out the numbers.

Getting pre-approved can give you a better understanding of your potential price range, estimated payment and cash needed to close.

Once we know that, I can build your home search around **your actual budget and priorities** instead of simply showing you everything you're technically approved to purchase.

THINKING ABOUT USING FHA TO BUY IN ST. LOUIS OR ST. CHARLES?

You don't need to have everything figured out before reaching out.

Whether you're ready to purchase now or you're trying to position yourself to buy later, we can start by figuring out where you are in the process and connecting the pieces from there.

Micadez Favors, REALTOR®
EXIT Elite Realty

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