An Introduction to FHA Mortgages for 20112/01/2011 The Federal Housing Administration (FHA) exists to assist homebuyers who aren’t supplied with many financial resources. Even if you have a low income or a damaged credit score, you can still qualify for a specialized FHA loan to help you complete your home purchase. Many borrowers are unaware of the benefits these loans provide. They are designed with underqualified buyers in mind. This makes them highly beneficial to the average first time home buyer who hasn’t built up equity through a previous home purchase or refinance. Some of the advantages of this loan type are listed here. A very minimal down payment is required. With most mortgage loans, you’re required to pay at least 10% of the purchase price down at closing. Most lenders will require more than this if you want to avoid mortgage insurance. Borrowers often have to pay for 20% of the home price up front. However, this is not the case with FHA loans. With an FHA loan, you only have to pay 3.5% of the home price up front as a down payment. You’re allowed to receive this money as a gift from family and friends. This allows you to purchase a home with just a few thousand dollars in the bank to cover closing costs. Most FHA loans are fixed rate loans. It used to be possible to obtain an adjustable rate FHA loan, but this is no longer common. FHA loans are designed to help borrowers who might otherwise be unable to qualify for a loan or who might run a higher risk of defaulting on a loan. Fixed rate FHA mortgages are now standard for these loans. The primary benefit of the FHA loan program is the leniency and flexibility that it allows for. In other words, you don’t need to have a high credit score or high income to qualify. Lenders are very lenient toward FHA borrowers due to the government backing that supports these loans. There are different allowable loan limits depending on which county you live in. Contact a lender within our network to learn more about these loan options and how you can benefit from an FHA loan in 2011. |
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