A big advantage of using an FHA loan is that you only have to put 3% down. And, you can get a third party to pay that 3% for you, which means that you don’t have to make a down payment. This is one way of getting a 100% loan for buyers.
When negotiating the sales price, you can get the seller to contribute 3% to a non-profit organization like Nehiamiah or AmeriDreams. These non-profits then turn around and grant the money back to the buyer for a fee. This fee is usually a few hundred dollars. So, basically you’re getting the seller to buy your down payment. The main caution for FHA loans is that the home you buy has to appraise for the purchase price – but this is something you would want to happen anyway with the home you’re buying.
The FHA loan limit is $251,000 for the purchase price of the home. This type of loan eliminates a lot of higher end properties, but you can still get a nice home in Charleston for this price. There is no credit score required for FHA loans, and rates are very competitive with Fannie Mae. FHA loans require more documentation than some of the other kinds of loans, so there are usually a few more steps involved in the loan process. For this reason, many brokers are not set up to write FHA loans and other brokers downplay the FHA. So, depending on the lender you choose, you may not have FHA as an option. However, these loans are becoming more popular, and you can often get more done with FHA loans compared to other kinds of home loans.