The Federal Housing Administration (FHA) home loan program is well suited for first-time home buyers in Washington who lack the funds for a large down payment. That’s because it allows for a down payment as low as 3.5% of the purchase price. But that’s just one of the benefits that makes FHA loans attractive to first-time home buyers in Washington. This article outlines some of the other benefits the program has to offer.
Why FHA Is Popular With First-Time Buyers in Washington
According to a recent analysis by the Federal Housing Administration, roughly 80% of purchase borrowers who used the FHA loan program were first-time buyers. These mortgage loans are not limited to first-time buyers. Anyone who meets the basic eligibility requirements can qualify for an FHA loan in Washington State. But this program is well suited for people buying their first home, as evidenced by the 80% statistic.
Which begs the question: Why are FHA loans so popular among first-time buyers in Washington State, and elsewhere across the country? Here are the primary reasons:
1. Borrowers can put down as little as 3.5%.
Washington home buyers can put down as little as 3.5% for an FHA loan, assuming they have a credit score of 580 or higher. According to Department of Housing and Urban Development (HUD) guidelines, that’s the minimum score needed to qualify for the low down payment.
This is arguably the biggest benefit for first-time home buyers in Washington State. People buying a first home obviously don’t have any proceeds from the sale of a previous home. This can make the down payment a higher hurdle to clear. Minimizing this upfront investment is often a top priority for Washington first-time home buyers. FHA loans give borrowers with limited funds a low-down-payment mortgage option.
Related: First-time buyer down payments
2. The qualification requirements are flexible.
There is a lot of flexibility built into the FHA program. In fact, the program is largely geared toward people who might not qualify for a conventional (non-government-insured) mortgage loan. Generally speaking, it can be easier for first-time home buyers in Washington State to qualify for an FHA loan, compared to conventional financing.
Federal Housing Administration loans are insured by the government. This insurance gives lenders some degree of financial protection from borrower default. This in turn allows lenders to approve borrowers who might not make the cut for a conventional mortgage loan.
Related: Income needed for FHA approval
3. FHA loans can be assumed by another buyer down the road.
It’s common for first-time buyers to sell their homes and move after a few years, perhaps to accommodate a growing family or a job transfer. So the resale potential of a home is an important consideration as well.
FHA loans are assumable. This means that if you sell the house down the road, the buyer could essentially take over your mortgage loan (and possibly enjoy a lower mortgage rate than those available at the time of the purchase). This feature could help you attract a buyer someday, when listing your home for sale.
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