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It’s sad that many second- or third-time homeowners and empty-nesters cannot get past the faulty paradigm that FHA loans are only for first-time home buyers. In fact, more and more homebuyers of all ages are choosing FHA loans for their first and subsequent home purchases—and for refinances—for some great reasons.
The FHA’s 203(b) mortgage has been a mainstream funding solution for first-time buyers for years. The FHA allows buyers to get more home for their money, and often with less out-of-pocket. In this area, buyers of any age can use the FHA’s 203(b) program to buy homes valued at up to $230,000 for less than $7,000 out of pocket. However, the benefits of FHA mortgages extend well beyond the stereotypical “minimum down” purchase for young buyers. Borrowers of all walks and ages are asking for FHA mortgages because of their flexible nature, and their unique ability to fill funding and debt management needs unlike many other loan products. Homebuyers previously fearful of rejection because of “bruised credit” (or even a complete lack of documented credit usage) have hope because of the FHA’s less stringent credit guidelines. Further, homeowners currently using FHA mortgages may refinance using the FHA’s “streamlined” guidelines which do not require full income verification or appraisals. Such streamlined refinances also allow FHA borrowers to easily convert their ARMs to fixed-rate mortgages. Eligible borrowers of any age may use the FHA to take cash out of their homes to the tune of 85% of their homes’ value. This is a huge benefit to seniors and empty-nesters who may be getting pinched by monthly bills while stuck with a fixed-incomes. These home owners, if qualified, could downsize their home and mortgage payments, and consolidate consumer debts, as long as their most recent mortgage payments have not been over 30 days late. Finally, FHA mortgages are easily configured to work with a variety of down payment assistance programs making them quasi-100% loans. Additionally, the fact that they are assumable means FHA users looking to sell in the future will not likely get “stuck” with their unsold properties. Timothy Phillips is a mortgage banker and newspaper columnist. Homebuyers should always consult a professional for guidance specific to their situation.
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