FHA Down Payment:

The primary and most essential expense that one can incur when purchasing a house is the down payment. Compared to other kinds of home loans, FHA loans have a lower down payment requirement, only 3.5 percent of the sales price. It is perfect for the first-time home buyers as they typically do not have the money for a more substantial down payment. When individuals spend less money for a down payment, they can use the savings for other expenses related to owning a new house, like drapes, blinds, curtains, etc.

The Interest Rate of FHA Loan:

The current market conditions and other economic factors determine the direction of how the interest rate fluctuates at any given time. It is essential to pay attention to the interest rate as it directly impacts the monthly mortgage payment. A low and fixed interest rate gives homeowners significant monthly savings, freeing up money to be utilized for other expenditures.

The interest rate on FHA loans is generally lower than conventional loans. Insured by the HUD, it is backed by the federal government in the form of mortgage insurance premiums. Having this insurance assures lenders that in the event of future default by the borrower, they will not be in a losing position; the mortgage insurance premium is their protection.

FHA Loan Application:

It has been said that an FHA loan is the most lenient among all loan programs in the market. FHA qualification guidelines are straightforward. The objective of the FHA is to make loans reasonable for many home buyers; hence, its primary focus is the ability to pay back and the credit history of the borrower. If an applicant has below-average credit, that individual can still apply for an FHA loan and qualify if they have had no delinquent payments for a year as a minimum from the date of application. Borrowers with low credit scores can apply much simpler for an FHA loan as opposed to conventional ones that typically need at least a mid-FICO score of 620.

Property Appraisal Report

All FHA loans require a property appraisal to determine their value and ensure their security. An assessment may not be required but is highly suggested. An appraisal is an expert assessment by an independent third party, the appraiser, providing the value of a property relative to the sales price. FHA appraisal report goes beyond the property value itself. The appraiser is also required to inspect the property to meet HUD’s minimum requirements for safety, soundness, and security.

A Few Myths About FHA Loans

FHA loans are a great option that allows numerous potential first-time home purchasers with past credit issues to break into the American dream of home-ownership. Seller concessions are high, and costs are low in today’s market standard.

The days of the subprime market for a hundred percent financing are gone and nothing but a thing of the past. FHA is the only viable option for several prospective purchasers to get a mortgage. Also, thousands of house owners who purchased houses in the past utilizing such subprime mortgages are now facing interest rate increase! The following are a few myths about FHA loans that stop people from applying.

• FHA Loans Take More Time To Get Approved:

The reality is that in today’s world of paperless processing and automated underwriting, FHA loans take no longer than conventional ones to get approved. The time frame to get approval is the same as a conventional counterpart.

• FHA Loans Need A Lot Of Extra Paperwork:

The documentation needed for an FHA loan is almost precisely very similar to that required for a conventional one. FHA requires just a few extra papers more than a conventional loan and the additional documents that FHA needs take little additional time and are there to protect you throughout the process.

• FHA Loans Cost More Than Conventional Loans:

The interest rates of FHA loan are based upon the similar market factors that conventional ones are based on. HUD strictly defines the closing costs of FHA loans as to what can be charged to a borrower. The only thing that might make an FHA loan cost more than a conventional loan is the mortgage insurance premium.

If you are a home buyer looking for mortgage options, an FHA loan is worth considering. With low rates, low closing costs, and high sellers concessions, getting an FHA-insured loan might be the way to go when financing your home purchase.

Benefits of an FHA Loan