First-Time Homebuyers Find Help in FHA Loan from Bell

Aug 31 2020

As a young couple with few assets and a short credit history, Ashley and Chris doubted they could make their dream of home ownership come true anytime soon – until they learned about an FHA loan from Bell Bank.
FHA Loan advice center

How an FHA Loan from Bell Helped One Couple

Turn ‘Someday’ into Today

They were going stir-crazy. Quarantined for weeks in the quaint one-bedroom apartment they used to love, Ashley and Chris started arguing over little things – socks on the living room floor, hair in the shower drain.  

Before the coronavirus turned them from newlyweds into what felt like cellmates, they’d always been excited to see each other at the end of the day, sharing stories as they tested new dinner recipes.

As COVID-19 dragged on, dinner conversations became nitpicking sessions that left the couple wondering how they were going to survive the pandemic – much less the rest of their lives – together.

Something had to give.

"Let’s go for a walk," Chris said one night as Ashley picked up the remote. He could see the doubt in her eyes as she looked down at her sweatpants and reached up to touch her unwashed hair.

"It’s fine. We’ll wear masks," he encouraged. "Besides, no one showers every day anymore."

A smile lit her eyes (for the first time in a while), and Chris felt his own face break into a grin.

They were walking hand in hand through a neighborhood near their apartment when they both stopped and stared. Ashley dropped Chris’ hand and grabbed his arm as she turned to him, mouth open.

The house they always walked to – the one with the front-porch swing and large tree in the back yard – was for sale.

"Maybe we’re ready," he said, the possibility he felt reflected in her eyes.

At Bell Bank Mortgage, Ashley and Chris found out they qualified for an FHA loan. Because the Federal Housing Administration (FHA) insures the loan, they could get a better deal – including a down payment they could afford.

Between the FHA loan and historically low interest rates, Ashley and Chris could afford more home than they expected – and since they also qualified for Bell’s no origination fee program, they could save thousands of dollars in closing costs.

Thrilled to learn their mortgage wouldn’t cost much more than they were paying in rent, the young couple left the office with a pre-approval letter from Bell, and something else they hadn’t felt in a while: hope.

Bell helped Ashley and Chris make their "someday" happen today.

While both of their jobs still have them working from home, when Ashley and Chris need space, they’re now able to find it, along with a front-porch swing where they can sit, sipping coffee together every morning as they share stories and dream about the possibilities their new home offers.

Maybe you’re ready. Only one way to find out! Contact us at 952.591.1880, or find a mortgage lender near you. Let’s talk about making room for the things you love, in a home that suits you.

In the meantime, keep reading to find out what you need to know about FHA loans.

How a Federal Housing Administration Mortgage Works

While first-time homebuyers can (and often do) qualify for conventional loans, FHA loans, which come in fixed-rate terms of 15 and 30 years, can be a great option for people looking to buy their first home who might need a little help qualifying. With an FHA mortgage, the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development (HUD), insures the loan, so lenders can offer you a better deal with:

Lower down payments

It’s a common misconception that you have to put 20 percent down on your mortgage. With more than 20 percent down, you don’t need to add mortgage insurance to your monthly payment, and a larger down payment reduces your monthly payments. But if you qualify for an FHA loan, your down payment could be as low as 3.5%. (That money can also come from a family member, employer or charitable organization as a gift.)

Lower closing costs

Closing costs – the fees charged when you take out a home loan – vary greatly, and they average between 2 and 5% of the home’s purchase price. On a $200,000 home, that’s roughly $4,000 to $10,000.

But don’t let the numbers scare you.

    Down payment assistance programs - available in some markets - can help first-time homebuyers.

    You can save thousands on closing costs at Bell Bank Mortgage, if you qualify for our no origination fee program

    You can sometimes negotiate to have the home’s seller pay your closing costs. (You may need to pay full asking price or more than the asking price to make this happen.)

    Saving even small amounts of money can really add up over time. (Keep reading to learn how!)

    Competitive interest rates Because FHA loans are insured by the federal government, they often come with competitive interest rates.

    Easier credit qualifying

    If you have a less-than-perfect credit score – and even if you’ve had some credit problems – it may be easier for you to qualify for an FHA loan. And remember, your credit history is not a permanent obstacle.

    Two big ways to improve your credit score are paying your bills on time and paying down debt. Set up automatic payments to make sure your bills are paid by their due dates. To help pay down debt, pay more than the minimum balance on higher interest debts, like credit cards. Once you pay off one debt, put the money you had been spending on that bill toward other debts to pay those down even faster.

    A mortgage does not necessarily cost more than paying rent. Interest rates are historically low, making mortgages more affordable, and a shortage of apartments nationwide is pushing rental costs higher.

    Our loan payment calculator can help you figure out how much your loan payment might be. And this calculator can help you figure out if it makes more financial sense to rent or buy.

    If you’re ready to find out how Bell Bank Mortgage can help you say yes to your first home, click here to find out how we work and connect with a mortgage banker. 

    Qualifying for an FHA Loan

    If you’re even thinking about buying a home, the first step you should take is to meet with a mortgage lender! Our friendly, experienced mortgage bankers will talk with you about your goals and can answer questions about how much home you can afford, which housing programs you qualify for, and what your closing costs might be.

    When applying for an FHA loan, you will need to show proof of steady income. There may be other qualifications, depending on your situation. When you meet with your mortgage loan officer, they will walk you through everything you need to do to qualify.

    In some circumstances, you may need to pay mortgage insurance, which is included in your monthly mortgage payment. (In some cases, borrowers will need to pay a lump sum initial premium at closing in addition to the monthly payment.) This is not the same thing as homeowners insurance, which covers financial loss to your home and belongings should disaster strike. (Learn about homeowners insurance coverage options from Bell Insurance here.)

    Student Loan Debt? Qualifying for a Mortgage May Be Easier Than You Think

    Student loan payment amounts indicated on the credit report may be used for qualifying purposes. This may help you qualify with a lower debt-to-income ratio. If no payment is listed, the lender will use 1% of the outstanding loan balance or a calculated payment that amortizes the loan over the term. 

    Expanded acceptance of student loan debt repayment options

    Student loan payment amounts indicated on the credit report may be used for qualifying purposes. This may help you qualify with a lower debt-to-income ratio. If no payment is listed, the lender will use 1% of the outstanding loan balance or a calculated payment that amortizes the loan over the term.

    Ready to Apply for Your Mortgage?

    The first step to ultimately getting the keys to your new home is getting pre-approved for your mortgage. In order to apply, you’ll typically need the following information:

    Residence history for the past 2 years

    Employer name(s), job title and dates of employment for the past 2 years

    Current pay stubs covering a full, 30-day period

    W-2s for the past 2 years (and 1099s and K1s, if applicable)

    Federal tax returns for the past 2 years – all pages and schedules and business tax returns (25% or more ownership), if self-employed

    Once you’ve gathered the necessary documents, choose a trusted mortgage expert near you, then apply online or schedule an in-person appointment to get pre-approved.

    After submitting your pre-approval application, your lender will follow-up with a phone call or email as soon as possible. Don’t hesitate to reach out with questions throughout the process.

    Tips for Success

    During the pre-approval process, your full credit report will be pulled. Follow these tips to ensure your credit score and history are in their prime:

    Make bill and credit card payments on time

    Avoid applying for additional credit or making any significant purchases on credit

    Keep your credit card balance below 30 to 50% of the card limit

    4 Hacks to Help You Save for Closing Costs

    Closing costs can seem prohibitive, especially if you’re already burdened with car payments and student loan debt. But it doesn’t have to keep you from owning a home.

    These 4 tips can help you save $4,000 or more toward your closing costs in one year:

    1. Pay yourself first.

    Set up your direct deposit to automatically put a certain amount of money into your savings account with each paycheck. Can you afford $50 a paycheck? That will give you $1,300 in a year if you’re paid every two weeks. How about $100 a paycheck for a savings of $2,600 in a year?

    2. Take advantage of programs to help you save, like Bell’s ChangeSaver program.

    It rounds up every purchase you make and deposits the difference into your savings account. If you round up your purchases by $2, and you make 50 purchases a month, that adds up to savings deposits of $100/month or $1,200/year. Plus, Bell matches 5% of your ChangeSaver roundups, up to $250/year. That means Bell will add $60 to your $1,200 ChangeSaver savings.

    3. Track what you spend.

    If you don’t track your spending or follow a budget, it’s too easy to impulse buy. If you have a budget, are there places where you can cut costs?

    Save $600 toward your home by forgoing cable for a year (estimating it costs $50/month).

    Invite friends over for a game night instead of going out. If you spend $100/month going out, you can save $1,200/year.

    Even lunches at a restaurant once a week can cost you $30-$50/month. And if you treat yourself to one coffee shop beverage a week, that’s around $20/month. Pack your lunches, bring coffee from home, and save yourself $50/month (or more!)

    4. Keep your goals visible.

    Going out to lunch or a movie can seem a lot more fun than brown bagging it or watching a video at home. But in the end, being able to pay your closing costs and get into a new home is a lot more fulfilling. When you feel deprived at not being able to treat yourself to a latte, it helps to be able to see and touch a tangible representation of your goals.

    Carry a picture of a house in your purse or wallet to remind yourself why you’re working so hard to save.

    Hang a goal chart, like a fundraising thermometer, in your home, so you can see and track your progress.

    There are also free cell phone apps, like Bell’s CardValet® program, that can help you stick with your budget. With CardValet®, you can set spending limits for general use and specify thresholds by merchant types to make sure you don’t go over budget.

    Following all of these tips, you can save roughly $4,000-$6,000 in just 12 months. It will take dedication, but when you unlock the door to your new home, it will be worth the sacrifice.

    * CardValet is a registered trademark of Fiserv, Inc.

    Ready to start your journey to homeownership?  Contact a mortgage lender to let us help guide you home.