Are you one of the tens of thousands of renters who have avoided buying a new home because you don’t think you can afford the mortgage?
Before you continue to throw away a hefty portion of your paycheck every month, get the truth about the process of buying a new home. The Federal Housing Authority (FHA) makes it easy to buy a home. If you can afford to pay rent, you probably can afford a mortgage payment. In many cases, the mortgage payment turns out to be less than the monthly rent. Plus, you get the tax advantages of home ownership, and the added value of having an investment, as opposed to a rent expense.
FHA loans require only a 3.5% down payment. If you’re looking at a $130,000 home, that’s just $4,550 down. Compare that to a conventional loan that could require as much as 20% down.
Plus, the FHA loans are more lenient with credit scores. You can qualify for an FHA loan with a credit score of 640.
Here are a few more things you should know about FHA loan requirements:
- You need two years of steady employment, preferably with the same employer.
- Your income over the past two years should be the same or increasing.
- Your credit report should have less than two 30-day-late notations in the past two years.
- Bankruptcy must be at least two years old, with perfect credit since then.
- Your new mortgage payment should equal approximately 30% of your gross income (before taxes).