Now, with conventional loan programs as restrictive as they are, the best recourse for first-time home buyers is to look to government agencies like the Federal Housing Administration (FHA), which offers loans to those with average credit or little money for a down payment, and the U.S. Department of Housing and Urban Development (HUD), which helps out with down payments and closing costs.
Here’s a rundown of the federal, state and local assistance currently available to first-time home buyers.
FHA-Insured Mortgages
Don’t have enough cash to make a 20% down payment on a home? That’s where FHA mortgages come in. ”FHA, by far and away, is the best option for first-time home buyers,” says Steve Curnutte, a Nashville, Tenn.-based mortgage broker.
To qualify, prospective buyers need a minimum credit score that falls in the mid- to high-600 range (much lower than the 720 required by most private lenders), says Curnutte. The lower limits come at a slight cost, however. FHA mortgage borrowers must pay an upfront fee of 1.5% of the loan amount, as well as an annual insurance premium of 0.5%. Yet, even with these fees, FHA mortgages will often cost less than a conventional mortgage that requires private mortgage insurance, says Curnutte. *source:http://www.smartmoney.com/
