Did you know that the Federal Housing Administration, or FHA, insures mortgage loans for home buyers? While not a loan itself, the FHA insures mortgage loans for buyers who may have little or no credit history, less than ideal credit, or those who are looking to put down a lower down payment on their home purchase. This can include first-time home buyers and younger home buyers, as well.
Mortgage loans insured by the FHA are referred to as FHA loans.
Why should I make my home FHA loan friendly?
FHA loans make the dream of homeownership possible for a significant portion of the buyers in the market. As a home seller, you and your REALTOR® should discuss the various loan types and the difference each loan can have on your real estate transaction.
Facts About FHA Loans
In 2018, almost 40% of mortgage loans were federally insured FHA loans. These loans are a popular choice for first-time home buyers, lower-income home buyers, and home buyers with a lower credit score. Many young, first-time home buyers like millennials - who make up 35% of the buyers market - typically have little credit history and an overwhelming number (63% according to some estimates) have $10,000 or more in student loan debt, which prevents them from placing a higher down payment on their home purchase.
FHA loans appeal directly to this market by making it possible for home buyers to place as little as 3.5% down on a home purchase. For example, let’s say a home is priced at $200,000. A down payment of 3.5% is $7,000. When compared to a conventional loan with a 20% down payment of $40,000, you can see why FHA loans become an appealing option for some home buyers.
How can I make sure my home qualifies for FHA loans?
First, you should know the FHA loan lending limits for your area. In Osceola County, the FHA will insure mortgage loans up to $275,665 for a single-family home. If your home is valued at less than the FHA loan limit, then your home could be open to consideration for buyers who plan to use an FHA loan.
Make much-needed home repairs.
The FHA will not insure a mortgage loan on a house that is in need of serious repairs. If your home has leaks, structural damage, mold, or exterior/interior paint that could contain lead, then you’ll need to make those repairs before selling your home. Otherwise, you risk having your sale fall apart if inspections reveal your house is not move-in ready.
Make sure your condo qualifies.
If you’re selling your condo, you’ll have to make sure it is FHA approved for mortgages. You can search by state and county online.
Be prepared for a request to help with closing costs.
There’s so much more that goes into selling your home in Central Florida than just placing it on the market and waiting for a buyer. In some instances, buyers using an FHA loan may need assistance with closing costs. If you’re selling your home to a buyer using an FHA loan, keep this in mind and ask your REALTOR® if it’s something they recommend for your situation.
It takes a lot of moving pieces working together to make the sale of your home successful. For this reason, it’s wise to work with a REALTOR® who understands the real estate market and home buyers in your area. Talk to your REALTOR® about making your home FHA loan friendly, and see if they think it’s the right choice for you.