First Time Home Buyers: Mortgage Tips for Right Now

first time home buyers
first time home buyers

First time home buyers usually have a huge learning curve to navigate when it comes to understanding mortgages. In the current housing market, mortgage literacy is even harder to come by, with new changes to the process emerging at a feverish pace. Tara-Nicholle Nelson of our sister site, Walletpop, has four new need-to-know tips for first time home buyers on the hunt right now.

If you've been saving your pennies and primping your FICO scorein hopes of getting into the housing market while the getting's good (i.e., while home prices and interest rates are low), it must seem like there's a "new rule" of the new, post-bubble market to learn every time you turn around.

And there is: mortgage guidelines, the rules of engagement around distressed properties and the decision rules for making a smart buy are changing at break-neck speed. It's a sign of the times, then, that we've uncovered at least four brand, spanking new need-to-knows for today's intrepid would-be homebuyers.

1) Some FHA Loan Guidelines are Getting Looser

Historically,FHA loansmade up only about 10%-15% of the mortgages originated nationwide, before the bubble. These days, they're up around 30% of new mortgages; and they're particularly popular with first-time homebuyers for their low down payment requirements (3.5% down, minimum, compared with 5%, 10% or even 20% down required on many non-FHA loans) and relatively lenient credit guidelines. FHA itself puts out bare minimum guidelines on loans it will insure, but usually, the lenders that actually originate the loans impose an "overlay" of their own, more restrictive requirements. For example, FHA guidelines only require a FICO score of 580, but most lenders have long required a FICO of 620 to even look at an FHA loan application.