1.
About FHA Loans
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2.
FHA loans are one of the more popular options for
mortgage borrowers, some of the benefits of using an
FHA loan is it offers lower down payments and they
have more lenient lending standards. The Federal
Housing Administration, also known as FHA, insures
mortgage loans so borrowers who utilize this program
are required to pay for mortgage insurance which
protects the lender if the loan were to default.
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3.
Why Choose a FHA Loan
It’s quite simple, the insurance. Borrowers are only
required to pay mortgage insurance making a FHA loan a
preferable choice when choosing a loan program.
Lenders can offer these loans at a significantly lower
interest rate as well. The lenient and flexible qualification
requirements is another reason that makes this home
loan program a favored option for borrowers.
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4.
Here are five benefits to
choosing a FHA Loan
over other loan programs
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5.
Down Payments
While majority of mortgage loans require a down
payment, one of the favored reasons borrowers do
choose this loan option over other loan options is the
lower down payment, at only 3.5% of the purchase
price. That is if you meet the minimum qualifying credit
score.
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6.
Credit Score
All lenders have a minimum credit score requirement which a
borrower must meet or exceed before they are qualified to utilize the
FHA loan. The down payment also depends on the borrower’s credit
score. A borrower with a credit score of 580 or higher may be
qualified for a down payment as low as 3.5%, but a borrower with a
lower credit score than 580 may have to put down at least 10% of
the purchase price. It’s good to know and understand your credit
score and credit history beforehand, but your lender can always help
you obtain your score. A score lower than 500 usually is ineligible for
a FHA loan, however there are always steps you can take to
increase your credit score.
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7.
Closing Costs
Another of the many benefits of the FHA loan is,
borrowers can have their closing costs covered by the
seller, the builder or even the lender. However, when
the lender pays the closing costs they will usually
charge a higher interest rate. It’s a good idea for
borrowers to compare loan estimates from competing
lenders to find the lender and options that work best
for them.
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8.
Approved Lenders
The FHA is a home loan program that insures the
lender and mortgage, which means to utilize it your
lender must be a FHA approved lender. Make sure to
do plenty of research and always compare lenders
because not every FHA lender will offer the same
interests rates or options.
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9.
203(k)
The FHA also offers a special loan program, this program is
specifically for borrowers who may need a little extra money for
repairs to their home. This loan program is called a 203(k), by utilizing
this program it allows borrowers to finance up to $35 thousand dollars
for nonstructural repairs, such as replacing fixtures, remodeling
cabinets or painting. The 203(k) loan amount is based on the
projected value rather than the appraised value of the house. This
means the loan is based off how much the house will be worth after
repairs and renovations are completed. This is a great program for a
home that may seem a little out of date, but just needs a few
upgrades.
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10.
T O L E A R N M O R E
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C L IC K HE R E
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11.
Justin McHood is Americas Mortgage
Commentator and has been providing
Mortgage commentary for over 10 years.
Information provided by:
Justin McHood
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12.
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