Securing a home loan mortgage can be a tough task. First time home buyers or home buyers with poor credit history know this all too well. If you fall into either of these categories, you should become familiar with a helpful loan option: an FHA Loan.
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If you would like to learn more about FHA insured loans, we have you covered!
An FHA loan is a mortgage insured by the Federal Housing Administration, which is a government agency created in part of the National Housing Act of 1934. This agency and the loans they produce were created to provide mortgage lenders adequate insurance, which will make home loans more accessible and affordable for people with less than stellar credit or a low down payment.
Obviously, the higher your credit score is, the lower your down payment needs to be, but in order to secure an FHA loan with maximum financing, a down payment of 3.5% is necessary. In order to make a down payment as small as 3.5%, a credit score of 580 or higher is needed. If you’re credit score lands between 500 and 579, you will need to make a down payment of 10% or higher.
Credit scores under 500 typically make you ineligible for an FHA loan. There are a few exceptions to this rule, though. If you believe your poor credit score is a product of nontraditional credit history or insufficient credit, we can help you, no matter your score.
It is important to remember that the lower your credit score, the higher your interest rate will be.
With a down payment as low as 3.5% , FHA loans are very appealing for first time home buyers. You can use cash from your savings, a gift, or a government grant to complete your down payment.
FHA loans will also sometimes cover costs associated with purchasing a home. Lenders and builders will be able to pay some of the borrower’s closing costs. These costs include appraisal, credit report, and title expenses.This usually only happens when the lender charges a higher interest rate, which is not the case with an FHA loan.
If you suffer a serious financial hardship and struggle to make payments, FHA insurance will provide some relief. You could possibly receive a temporary period of forbearance or a deferral of part of the loan balance at no interest.
You can also refinance your current home mortgage with an FHA loan! The less stringent qualification and credit requirements almost always present a great refinancing option.
It is important to note the Federal Housing Administration is not a lender. The FHA is an insurer, so you must receive your FHA loan from an FHA-approved lender. The costs and services of an FHA-approved lender vary.
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