You want to apply for an FHA loan then you need to find the best FHA lenders in your area. Everyone dreams of buying a home where he could live happily with the family. But it is not easy to save money to buy a house these days especially when it becomes challenging to earn a living. Conventional loans are a great way of financing, but with a low credit score, no institution is willing to lend you money. In this situation, the FHA loans are helpful in making you the homeowner. So, find the best FHA lenders now. Today we will cover the following topics:
- What is an FHA loan?
- Advantages of FHA loan
- Disadvantages of FHA loan
What is an FHA loan?
The financial institutions give loans to consumers for various purposes. Well, they earn a profit by lending money to the people as they receive premiums each month that includes the original amount and the interest as well. But they have some certain requirements, and the borrower needs to fulfill all these requirements to become eligible for a loan. One of these requirements is to have a good credit score.
It means people with a low credit score can’t obtain a conventional loan. Then should they forget about buying a house? Of course not, they can get a house of their own through FHA financing. It is a loan approved by the federal housing authority that makes you able to receive the amount for buying a house even if you have low credit score and down payment.
The applicants who have a credit score of 580 or above they can get FHA loan for 3.5% down payment. Consumers who have a credit score below 580 can obtain FHA loan for 10% down payment.
Advantages of the best FHA loan Program:
Below are the advantages of FHA loan:
Smaller down payments:
The first benefit you get by applying for FHA loan is the smaller down payment. We have already stated above in the article that conventional loans have the high down payment requirements as compared to FHA loans. Not everyone can afford to pay a high amount as down payment, so they get attracted to the FHA loan for low down payment requirements.
For the borrowers below 580 credit score: 10% down payment and for the borrowers above 580 credit score: 3.5% down payment.
Flexible qualification rules:
The qualification guidelines of applying for the conventional loans are quite stringent. But people can easily qualify for the FHA loans as it has the most straightforward qualification requirements. The FHA approved lender will check that whether the applicant is eligible for FHA loan or not. Upon ensuring about the eligibility of the applicant, he starts further processing.
Another benefit of the FHA loan is that it is assumable. It means that if you want to sell the house down the road, you can transfer the FHA loan to the buyer. It is necessary to know that the buyer also has to meet all guidelines set by the Federal housing authority. If he fails to do so, he cannot assume the loan.
Down payment gift option:
In many types of loans, you are allowed to get benefit from the down payment gift option. If we talk about the conventional loan, you are only limited to certain gift amount. But in FHA loan you can have the entire down payment amount gifted to you by a family member or an approved donor. This is a great benefit for the first time home buyers who do not have enough cash to pay as down payment.
Well, everything has a different side as well. There are some disadvantages of FHA loan too. For example, you are making lower down payments, so you need to pay more private insurance mortgage. The loan amount you can obtain may differ from state to state so you may not buy the house you wanted because of the price issue.
But FHA loan is an excellent facility for low-income people who want to buy a house. But you need to contact the best FHA lenders to make sure you get the loan as soon as possible.