FHA Loans and Down Payment Assistance
Here’s a question we get from many new homebuyers: Do you have to use an FHA loan with down payment assistance? The answer is no — there are different types of mortgages available depending on your situation.
Each down payment assistance program has a list of “eligible first mortgages” that can be used with the program. A first mortgage is simply your primary home loan. And your down payment assistance can come in many forms, such as a gift forgiven at closing or a second mortgage — funded by a Housing Finance Agency (HFA), municipality, nonprofit or employer. Most down payment programs accept a range of first mortgages, including conventional, FHA, USDA and VA loans.
FHA loans have long been popular for first-time homebuyers because of the low 3.5% down payment requirement and flexible credit requirements. However, it’s important to understand that conventional loans accept just 3% down and can be paired with a down payment assistance program. Plus, HFA Advantage or HFA Preferred conventional loans provide the lowest mortgage insurance rates for HFA loans — with or without a down payment assistance program.
It’s important to compare different mortgage loans to see what works best for your situation. keep reading