So, you want to apply for a mortgage loan to buy your first home? Great! But which loan you want to apply for? As you are a first-time home buyer, an FHA loan will be an apt choice for you. Guaranteed by the Federal Housing Administration, you can get approval for this loan with a low down payment and credit score.
But as the loan is offered by FHA lenders, you need to opt for one of the best FHA lenders in Houston. Want to know about how to choose the lender. Follow these tips –
- Shop several FHA mortgage lenders
The FHA-approved lenders offer an FHA loan. But each lender offers his or her own FHA loan rates and fees that is why; it is important for you to shop around. Moreover, some FHA lenders have more lenient qualification requirements than others. To make the loan profitable for you, you should compare your all-in FHA mortgage costs with at least three top lenders before you move forward. Your local mortgage lenders might not be offering you the best rate. So, you should continue shopping for FHA lenders. You should keep this in mind that all FHA loans require the borrower to pay mortgage insurance premiums (MIP). There is an upfront MIP of 1.75 percent of the loan amount that is paid when you get the loan. Besides, there is an annual MIP that varies from 0.45 percent to 1.05 percent, based on factors, such as loan amount, loan term, and the loan-to-value ratio.
- Check your credit score
Before you apply for an FHA loan, you need to know your credit score. Maybe your credit score is better than what you think. And it can make you eligible for conventional home loan programs. Besides, keep this in mind that your lender options can be limited if your credit score is especially low. Although one can get approval for an FHA loan with a 500 credit score, the higher the score, the better it would be for you. Moreover, with a better credit score, you could be eligible for the best mortgage rate. Also, if your credit score is below 580, you need to come with a 10% down payment while with a credit score above 580, you can get the loan approval with a 3.5% down payment. So, if your credit score is between 500 and 579, then you should either take steps to improve your credit score or come with a decent down payment.
- Know your APR
Don’t forget to measure the impact of the APR, or annual percentage rate, you qualify for. Remember that there is a difference between the interest rate and APR. Your APR will determine how much interest you pay in each of your mortgage payments, and thus, how much interest you will pay over the life of the loan. You may assume that FHA loans would all have the same APR, but this could not be further from the truth. As lenders set it their own, there could be a great difference. You can check it by using a mortgage APR calculator or by asking the lender.
So, shop for lenders, check your credit score and improve it if needed, and know your APR to find the best FHA lender for you.