The Advantages of Buying a Home With an FHA Loan
June 7th 2010 Posted at fha home loans
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Buying a home is a major undertaking for both first-time home buyers and current home owners who are buying a new home. One of their main goals is finding the right type of financing for their home needs. An FHA loan is a great financing option because it has many advantages and incentives that aim to help those in the process of buying a home save money.
This Loan Saves Homeowners Money
A major expense during the home-buying process is the down payment on the new home. But, compared with other types of home loans, FHA loans tend to require lower down payments, usually around 3.5% of the purchase price. This can be a relief for first-time home buyers who do not have large sums of money upfront, as well as current homeowners looking for ways to cut back on their expenses. Spending less money on a down payment leaves borrowers with more money for other costs associated with a new home.
Because interest rates will affect a homeowner’s monthly mortgage payment, rates are something to consider when choosing a home loan. Interest rates tend to fluctuate based on current market conditions and other factors. But, because the Federal Housing Administration insures this type of financing, lenders are able to offer low interest rates. Homeowners are also able to get fixed interest rates so that their interest rate will not change over time. Low, fixed interest rates will save homeowners money and leave them with more money available for their other expenses.
This Loan has Simple Qualification Guidelines
The FHA aims to make these loans affordable for different types of home buyers. Therefore, they do not have strict credit or income requirements. If an applicant has a troubled credit history, he or she may still qualify for a loan, as long as he or she has had no delinquent rent or mortgage payments in the last twelve months. Applicants with low credit scores can still qualify, but most lenders will require an applicant to have a credit score of at least 620.
This Loan has Few Requirements
The FHA requires that the applicant have an appraisal done on the home to determine the home‘s value and to determine that the home is safe and meets other necessary requirements. An inspection is not required, but it is highly recommended to check for any essential repairs that need to be done on the home.
There is a mortgage insurance premium that must be paid. It covers loan costs in the event of a default and is usually about 1.75% of the loan amount. The upfront portion of the insurance can be financed into the loan, which eliminates one out-of-pocket cost. Homeowners will then need to pay a monthly mortgage premium with their mortgage payment.
Consider an FHA Loan for Your Home Purchase
This type of financing is known for having high loan-to-value limits, which means that the amount of the loan can be equal to a higher percentage of the home‘s value compared with other types of home loans. Please note that loan limits vary by location. The federal maximum loan limit is $729, 500.
If a potential applicant finds the advantages of an FHA loan appealing, an FHA loan specialist can help them take advantage of this loan to finance his or her new home.
Victoria Belle-Miller is the newest member of the FHAMortgageBank.com writing staff. Her background in journalistic writing and ability to evaluate the issues that Americans face in daily life make her a strong addition to the FHA loans team and a valuable source of sound mortgage advice.
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