Down Payment Requirements on a FHA Loan
Did you know that nearly half of all first time home buyers say that the easy down-payment requirement was the number one reason why the borrowers choose FHA to finance their house? One of the often cited benefits of financing with an FHA home loan is that the down payment requirements are much lower than those that are found with non-FHA home loans. Often, lenders will require prospective home buyers to pay a down payment of around 20% of the overall cost of their home outright before closing, and this amount can be a tough number for many home buyers to achieve. For a $100,000 home, this means $20,000 needs to be paid up front, and this number is one that will often take months or years for a person or couple to save up for. However, with an FHA home loan, down payments are significantly lower, and they can reach rates as low as 3.5% for buyers who have high credit scores.
A person applying for an FHA home loan who has a high credit score can achieve exceptionally low down payment rates, making the option of an FHA home loan a very attractive one. While they may be required to pay much more for a non-FHA home loan, the down payment number they have with an FHA home loan is far more affordable and will not require the same amount of saving, allowing them more convenience when looking to close on their home. Many of those looking to buy a home with an FHA home loan will find that they qualify for the 3.5% down payment rate, even if their credit proves to be mediocre.
However, a person with lower credit, or no credit, could find themselves needing to pay a higher amount for their down payment than a person who has a moderate or high credit score. The 3.5% down payment rate can increase according to a person's creditworthiness, but the benefit of an FHA home loan still stands as they will be able to acquire the loan they may not otherwise be granted. FHA home loans are often given to those who have low credit scores, credit blemishes, or no credit at all, where the benefit of a home loan may not be granted by other lenders to such borrowers.
These low down payment rates allow home buyers to close on their home faster, as their down payment will take less time to save up for. A more affordable down payment rate also makes home ownership a reality for some who may otherwise find it difficult to save the necessary down payment amount required by other non-FHA lenders.