Well, over the past couple of months, my husband and I had been in limbo about to continue renting or to consider buying a home. Both can have advantages and disadvantages. Not really acting on our thoughts about buying, we happened to stumble on our dream starter home, with a pretty dreamy price. After discussing things with our potential seller, we applied for and received pre-approval on a loan. And after negotiating happened over a day, we settled on an offer. Right now we are amidst of a home inspection and final loan approval this week. While I know all of you are not looking to buy a home right now, I plan on featuring a couple of posts on the home-buying process since there are many opportunities to afford homes at reasonable costs - especially in the buyer's market that exists right now.
While being a graduate student does not supply a great income to our dual income, we found we were still able to afford a reasonably low down payment with an FHA loan. FHA loans are loans that are insured by the government (specifically the Federal Housing Administration), that are provided to lenders to let people, who may typically not be eligible for a loan due to a small down payment or low income, afford a home. These are very common with first-time home buyers who generally cannot afford a hefty 20% down payment, and FHA loans allow down payments at 5% or even less. These types of loans are also good for people with credit problems or bankruptcies, and provide a great way to rebuild credit. In addition, much of the down payment can be gifts from relatives (which some lenders may not traditionally allow). However, these loans are not just for first-time home buyers or people with bad credit - anyone can qualify and there are no income limits. More information on the potential benefits of FHA loans are available in home buying books, on numerous websites, and specifically the FHA's website.
While this sounds like a good deal, there obviously can be catches to something that seems to good to be true. In many ways, FHA loans can be more expensive than a traditional loan, because of the fact of the low down payment and the insurance you have to pay for supplying such a small down payment, so be sure to do your homework before considering FHA loans as an option for you.
More to come on first time home buying for sure, as this is proving to be quite a journey and learning experience in the world of personal finance. :)