An FHA loan is a home loan that has been insured by the Federal Housing Administration. These loans are insured by the federal government for FHA-approved lenders in order to reduce their risk of loss if a borrower defa-ults on their mortgage payments. Typically, the borrower pays for the mortgage insurance that protects the lender.
Since the 1930’s, FHA loans have been making homeownership possible for people who may have thought that they would never be able to purchase a home. FHA loans are extremely popular among first time home buyers.
If you think that an FHA loan may be right for you, we can help. Keep reading to find out more about this special type of loan and how it can benefit you.
There are several advantages to FHA loans. They are typically among the easiest loans to qualify for because they do not require the borrower to have top notch credit. These types of loans also usually require a lower down payments than other similar loans. Typically, a small down payment of only 3.5 percent is required, rather than the typical 20 percent down payment required by most home loans. FHA loans are also assumable. This means that if you decide to sell your home, the new buyer can take over your loan for the house.
Since FHA loans are typically easier to get approved for than other types of loans, there are stricter standards that apply to borrowers of these loans. Homes purchased with FHA loans must meet certain criteria and they must be appraised by an FHA approved home appraiser.
These loans also require two different kinds of mortgage premium payments. An Upfront Mortgage Insurance Premium (MIP) and an Annual Mortgage Insurance Premium, which is charged monthly. Additionally, there are caps on FHA loan amounts that vary by state and county.
In order to qualify for an FHA loan, you must meet certain eligibility requirements. Your employment history, residency status and credit score must meet certain criteria.
If you are interested in an FHA loan, we can help to sort out all of the details and help you to learn if this type of loan is right for you. Call us today!