Make Homeownership More Affordable With These Two FHA Loan Programs

Homes are a great investment, but the ever-increasing cost of property puts them out of reach for many potential buyers. Luckily, the Federal Housing Authority (FHA) has several loan programs that can make homeownership more affordable. Here are two you should investigate.

FHA Graduated Payment

People with low to moderate income may decide to put off buying homes because the mortgage payments take too big a chunk out of their paychecks. While it is smart to wait until your income increases, this could mean waiting several years to buy a home. By the time you're ready to purchase, home prices may have gone up again, putting the property out of reach once more.

The FHA Graduated Payment program helps people in this situation get into a home sooner by starting their mortgage payments low and gradually increasing them over a period of years to give homeowners time to improve their finances. For instance, the mortgage payment may start out at $1,000 per month but increase to $1,250 the following year and then $1,500 the year after that.

To qualify for the program, the home you're buying must be your primary residence and you should currently make enough money and have good enough credit to be approved for the mortgage based on the lower payments. Although the bank generally won't verify your future income, you should definitely make sure you'll be able to afford the higher mortgage before applying; otherwise, you could be setting yourself up for financial difficulties.

FHA Energy-Efficient Mortgage

The FHA Energy-Efficient Mortgage is a type of home improvement loan that lets you borrow additional funds to renovate the home you buy so it uses less energy to operate. For instance, you can use the funds to install a more modern HVAC system with features that reduce your home's energy consumption.

In addition to being able to update your home, this updates you make with this loan can reduce your monthly energy bills, making the house a little more affordable over the long-term. Be aware, though, that any improvements you make must cost less than the savings you'll obtain over time.

Additionally, you must be able to qualify for the maximum FHA loan amount available, which varies depending on where you live. In low-cost markets, the ceiling is $294,515 but in high-cost areas, it's $679,650. It's best to consult with a mortgage lender to determine what the limit is in your area and organize your finances to ensure you can qualify if you want to use this program.

For more information about these loans or other FHA loans, contact a lending institution.