There many conventional mortgages today that do not require any down payment of around 10%, which is why low down payment programs like FHA remain a popular choice for Charlotte first time buyers. The FHA program started back in 1934 and since they have helped make it possible for a wide variety of buyers get a home mortgage with as little as 3.5% down payment.
There are specifics, however, that have to be adhered to by the borrower when obtaining an FHA mortgage. For instance, prospective borrowers with a credit score of 580 would always need a down payment is 3.5%. Borrowers possessing a credit score of at least 550, can sometimes be approved with a greater down payment of 5 or 10%. As you can see, the lower the credit scores, the bigger the down payment that the borrower has to shell out.
This makes sense in that the FHA program, as much as it was primarily designed to cater to a very wide range of living standards. This would ensure the borrower has a decent amount of equity investment in the transaction.
On the flip side, for people who have a credit score of around 720 have much more flexibility. They could obtain an FHA loan with the most favorable terms and interest rates.
It’s important to note, the FHA loan, like many nearly government-backed mortgages (USDA, VA) has a mandatory mortgage insurance premium or otherwise known as “MIP” The FHA upfront mortgage insurance will be around 1.75% of your total loan and is charge is often rolled into to the buyers overall loan balance. This is assuming you are borrowing for a maximum of four family owner occupied homes. This insurance was actually not designed to lower your risks in the transaction. Instead, it is implemented for the lender’s protection.
FHA does have many advantages for North Carolina home buyers:
- Secure fix rate terms
- Some of the lowest interest rates available today
- Government backing
- Closing costs can be paid by the home seller
- Buyers down payment can be in the form of a “gift” from friends, family or other eligible sources
- Lower credit score criteria when compared to conventional loans.
- Recently increased FHA Loan Limits
Residents in more locations of NC should also read more about the 100% North Carolina USDA Loan
Questions about FHA loans? Please contact us at the number above, or just submit the Quick Contact Form on this page.