Buying a Home With an FHA Loan in Orange County, NY: What Buyers Should Know

By Ammar Iqbal | Real Estate Salesperson, eXp Realty

An FHA loan is one of the most common ways people buy their first home in Orange County, NY. It's backed by the Federal Housing Administration, and it allows a smaller down payment and more flexible credit rules than many conventional loans. Here is what buyers should know. For an overview of the area, see my Middletown and Orange County guide.

Down Payment and Credit Basics

With a credit score of 580 or higher, FHA allows a down payment as low as 3.5%. Scores from 500 to 579 may still qualify with 10% down. Lenders can set stricter rules of their own, so talk to a few. Gift money from family can usually go toward the down payment. For more, read what credit score you need to buy in Orange County.

Mortgage Insurance

FHA loans include mortgage insurance. There's an upfront premium of 1.75% of the loan amount, which is usually added to the loan, plus a monthly premium. With less than 10% down, the monthly premium generally stays for the life of the loan. Many owners later refinance into a conventional loan once they have more equity. Ask your lender to show you the full monthly payment, including taxes and insurance.

The Home Has to Meet FHA Standards

An FHA appraisal checks value and also basic safety and condition. Common issues in older Orange County homes include peeling paint in homes built before 1978, missing handrails, roof problems and heating systems that don't work. Some fixes can be made before closing. A home that needs major repairs may be better suited to a different loan, such as an FHA 203(k) renovation loan.

Two- to Four-Family Homes

FHA can be used for a two-, three- or four-family home if you live in one of the units. That's a popular strategy in Middletown, where rent from the other units can help with the mortgage. See my guide to buying a two-family home in Middletown.

Making Your FHA Offer Strong

Some sellers worry FHA appraisals are stricter. A solid pre-approval, a clear inspection plan and a realistic price help your offer stand out. FHA also allows sellers to contribute up to 6% of the price toward your closing costs. Start with getting pre-approved and look at first-time buyer programs in Orange County that may pair with FHA.

Next Steps

Browse homes for sale in Middletown and Orange County. Selling your current home first? Get a free home value estimate. Have questions about FHA? Contact me and I'll help you plan your purchase.