When most buyers look to buy a house, they’re usually familiar with the conventional mortgage avenues, but not all are aware of the advantages of purchasing an FHA approved home. These homes are specifically authorized for sale through the Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD). Before doing so, you should first learn more about FHA approved homes, where to find them, and how this process works if you’re hoping to purchase a home with an FHA loan.
What is an FHA Approved Home?
What is an FHA approved home? An FHA approved home is one that falls within the qualifying parameters established by the Federal Housing Administration for FHA insured loans. The FHA, or Federal Housing Administration, is a government-backed agency that works to make homeownership more accessible by providing mortgage insurance to lenders. That allows lenders to make loans with lower down payments and better terms, making homeownership accessible to more millions of people.
To qualify for an FHA loan, the home you’re buying must meet certain safety, security, and habitability standards. This is because the FHA does not insure loans on homes that do not meet these criteria, meaning both that the home is safe to live in for the buyer and that the home itself is of sufficient quality.
Advantages of FHA-Approved Homes
There are many benefits of FHA approved homes for homebuyers, particularly first-time shoppers or buyers with less financial means. These benefits include:
- Lower Down Payment: One of the best advantages of buying an FHA approved home is getting a loan with a down payment as low as 3.5%. Many people can qualify to buy for much less than the conventional loan standard of 20% down.
- Easier to Qualify For With Bad Credit: FHA loans often are easier to qualify if you have poor credit than conventional loans. Where conventional loans might require a credit score of 700 or greater, an FHA loan can be obtained with scores as low as 580, making for a wider net of potential homebuyers.
- Competitive Rates: Many times FHA loans have lower comparative interest rates that save buyers a lot of money on the life of the loans. This has made homeownership more affordable over the long run.
- More Accessible for Buyers: FHA approved homes tend to be perfect for buyers who lack extensive credit history, for self-employed buyers, or for buyers who have had financial hard times in the past. It’s easier for people to get financing because of the FHA’s flexible qualification criteria.
- Wide Availability: FHA loans can be used to purchase a variety of property types, including single-family homes, multi-family homes, and certain condominiums. Such broad eligibility means that buyers can look at the full spectrum of properties and find a suitable home for them.
How to find for FHA-Approved Homes for Sale
Now that you know the benefits of FHA approved homes, it’s time to find them. There are plenty of resources for buyers to find FHA approved homes on the market, so all is not lost.
1. HUD Home Store
The HUD Home Store is an official government website for FHA approved homes for sale. This site shows homes owned by the U.S. Department of Housing and Urban Development, or HUD, that are available for sale under the FHA loan program. Because these homes are typically foreclosures, they are likely to be listed for lower than comparable homes, giving buyers a chance to buy a home for less.
Using the HUD Home Store website, you can filter properties by the location, price, and other categories. Tip: Each property on the site has detailed information, such as photos and descriptions, as well as the FHA case number that’s needed to submit offers.
The mortgage note is adjusted backed to marketing below the maximum limits, which are not monthly on the maximum basis.
If you work with a real estate agent experienced in FHA approved homes, which can also be a huge plus. They know the particular standards needed for FHA loans, and they will work with you to locate houses that fit the bill. Agents can also help you enter offers, negotiate terms, and guide you throughout the home-buying journey.
2. Local Government Sales and Auctions
HUD Home Store is not the only option; local governments may also auction or sell FHA approved properties. They could be foreclosures or government-owned homes that qualify for FHA financing. Contact your local housing authority or county’s government office to find out about any upcoming sales events.
3. Online Real Estate Platforms
Sites like Zillow, Realtor and Redfin that include filtering tools so buyers can search specifically for FHA approved homes. These platforms consolidate listings from different sources, including those eligible for FHA financing and can simplify your home search.
What to Know Before Buying a FHA Approved Home
Although buying an FHA approved home has many advantages, there are a few key things to remember:
- Condition of the Home: While homes bought or refinanced with an FHA loan are required to be safe and habitable, it does not necessarily mean they are in good shape. Don’t forget to below a proper inspection of the property to avoid any hidden problems that will lead to expensive repairs.
- FHA Loan Limits: FHA loans have borrowing limits that depend on the county and type of property. Be sure to check your loan limits before you fall in love with a home, because you’re probably going to need to stay under FHA loan limits.
- Types of properties: Not all properties qualify for FHA financing. Some types of homes, including co-ops or vacation homes, may not qualify, for example. Just make sure that the property you’re considering is eligible for FHA financing before you make an offer.
- Competition: HUD homes tend to be more competitive than other properties on the market since they are often priced lower than comparable homes. But this also means there will be more competition for these homes, especially in desirable locations. Brace yourself for potential bidding wars.
Conclusion
FHA approved homes for sale are a great way for potential homeowners, especially first-time buyers and those low on financial resources. FHA loans allow for a down payment thus bringing the home within reach with lower credit score requirements and competitive interest rates. It is possible to benefit from HUD homes and FHA financing only if you know where to look, what to do, and who to contact. All I ask is that you do your due diligence and make your purchase with all the information you need.