Financing Your First Home: FHA vs HomeLLC
Many potential homeowners shy away from buying for fear of the down payment. Especially in today’s economy, not many young people have 20% of a home value saved up and ready to invest in a home. That’s where specialty homeowner loans come in handy.
FHA is one of the most popular lenders for first-time buyers. This loan is easy to acquire and doesn’t require a large down payment for approval. However, it may not be the best option out there. Here’s how an FHA loan compares with the HomeLLC investment.
- FHA: FICO over 580.
- HomeLLC: All U.S. citizens and permanent residents.
Minimum Down Payment
- FHA: 3.5%
- HomeLLC: 2%
- FHA: Limited to Fannie Mae/Freddie Mac confirming loans, current limit for most areas is around $510,000.
- HomeLLC: Maximum home price of $2.5 million.
Chance of Buying a Home
- FHA: Many sellers don’t like dealing with FHA loans, as closing isn’t guaranteed.
- HomeLLC: Sellers are likely to accept offers, since the closing process is seamless and guaranteed.
- FHA: Around 1%, along with an underwriting fee between $350 and $1,000.
- HomeLLC: 0%
Upfront Mortgage Insurance Fees
- FHA: Typically, 1.75% of the loan.
- HomeLLC: None.
- FHA: Since the down payment is frequently minimal here, mortgage payments stay higher due to a high loan to value ratio (around 97.5%, if providing minimum down payment).
- HomeLLC: Since the down payment is generally 20% here (with HomeLLC’s investment), mortgage payments stay low due to a low LTV ratio (80%).
Additional Monthly Fees
- FHA: When borrowing from FHA, you will not only need to pay the upfront mortgage insurance fees, but also cover an annual premium. This is generally .45% to 1.05% of the loan amount. In many cases, this fee can be dropped after you have paid off 20% of the loan, but in some cases, must remain place for the duration of the loan.
- HomeLLC: None.
Portion of Appreciation
- FHA: You keep 100% of your home’s appreciation value.
- HomeLLC: You share your home’s appreciation value with HomeLLC.
Portion of Loss on Home
- FHA: You stand to lose 100% of your home’s depreciation value.
- HomeLLC: You share any losses with HomeLLC.
Both of these options can provide the necessary help you need when looking to finance your first home purchase. While the FHA loan is well known, easy to acquire, and allows you to keep 100% of your home’s appreciation value – there are also risks involved. A low down payment means more fees, higher mortgage payments, and a more difficult time closing the deal.
HomeLLC allows you all the perks of the FHA loan without these fees – all while keeping your mortgage payments manageable and allowing you the freedom to buy with confidence. This is a great option for new prospective homeowners looking to purchase a home without the hidden fees and high down payments. You can chat with one of our team members today to learn more!