Alright. I've heard that FHA guarantees loans for 3.5% down, even to buyers with weak credit. I've also heard that there's another kind of loan called an FNMA Homestyle loan, and that the USDA also offers zero down loans to rural areas. My question is, how do you go about getting those loans? What's the procedure for securing these loans and finding properties? Do you just go to a real estate agent and say, "Hey, I'm trying to buy a house with an FHA loan" and they do the rest, or what? As you can tell, I'm pretty much clueless on this, so any and all information would be greatly appreciated.
A real estate agent will assist you with buying the property. If you don't have the cash to purchase a home, you need a loan. The loan is also called a "mortgage". Banks and mortgage companies are the main two suppliers of mortgages. The mortgages are insured by agencies such as FHA, Fannie Mae, Freddie Mac, USDA, VA... each agency has it's own credit and down payment requirements. A mortgage company has a loan officers that will sit with you and tailor the loan to your needs. An FHA may be best suited based on your credit; or a conventional (Fannie/Freddie) might. The loan officer is who would help you with that.
Just for info- FHA is a 3.5% down program for purchasing 1-4 unit properties owner-occupied. Fannie Homestyle is a renovation loan program (they give you money to purchase and rehab a property). USDA is a 0% down loan if the household is within county income limits and the property is located within the USDA areas of lending (usually rural areas).
Ok, great. This is the kind of info I need. Thank you, Ryan. (by the way, I'm from Groton. I grew up in Poquonnock Bridge, New London, and Norwich).
What I need to know is, what is the FIRST step in getting an FHA loan? Do I contact a real estate agent first, a mortgage company, or something else? Also, since my wife and I are interested in 2 - 4 unit homes at this stage (so that we can house hack), does FHA take the rental income into account or no?
Always find your money...then go shop for a property. I would go to a Mortgage Broker in your area and work with them. They will be more inclined to work through several scenarios with you than a big box bank will.