Some of the most favorable options that come with an FHA home loan is the low down payments and the more lenient guideline standards available to borrowers. An FHA Home Loan is best explained as a mortgage loan that is insured by the Federal Housing Administration. Borrowers are required by the FHA to pay mortgage insurance which protects the lenders if a borrower were to default on their mortgage.
Since the FHA requires borrowers to pay mortgage insurance it’s one of the reasons why lenders can offer this program with such significantly lower interest rates as well as offer more lenient qualification requirements. This is why so many borrowers favor the FHA home loan program over any other home loan program.
FHA Approved Lenders
The FHA loan program is more of an insurer than an actual lender. This means to use the FHA home loan, your lender must be FHA approved. Not every FHA lender will offer the same interest rates and guidelines always compare lenders to find the best options to fit your needs.
Most lenders will have a minimum credit score requirement which borrowers are required to meet before being qualified for the FHA loan. The down payment amount will depend on the borrower’s credit score. A borrower who has a credit score of 580 and up will most likely have to put at least 10% down. It’s important to know your credit score before you speak with your lender. If you need help obtaining your credit score, however, your lender can assist you. Borrower’s whose score is below 500 are most likely ineligible for the FHA home loan, however, there are steps you can take to raise your credit score. Talk to a lender today to find out how.
FHA Down Payment
There are only a select few home loan programs that offer no or low down payment options. The reason so many borrowers choose the FHA home loan over the other home loan programs is the 3.5 percent down payment option. That is of course if you meet the qualifying credit score. Other scores may have different down payments. Talk to a lender to find out exactly what you qualify for.
Making some repairs to your home or just renovating? The FHA offers a special program for borrowers who need extra money for repairs to their home. This program is called the 203(k). Using the 203(k) will allow a borrower to finance up to $35K for nonstructural repairs, such as replacing fixtures, remodeling cabinets, and painting. The 203(k) loan amount will be based on the projected value after the remodel is complete, not the appraised value of the home. This is a great option for a house that is outdated and needs some updating.
FHA Closing Costs
Another benefit to the FHA home loan is having your closing costs covered by the seller, builder, or your lender. If your lender agrees to pay the closing costs they will most likely charge you a higher interest rate. However, you can always shop around for lenders and compare their loan estimates to find the lender with the best options that fit your needs. Click the link below to start your search.