If you’re an aspiring homeowner and have been Google-searching the ins and outs of what different kinds of loans have to offer, you may want to search more about how a loan with the Federal Housing Administration can aid you in your quest to the American dream.
The FHA loan program presents two fundamental advantages to homebuyers: flexible terms and conditions and considerably low down payment. Loanees who are granted FHA mortgages can put in a minimal down payment worth 3.5% only. Those with prior credit problems may also find that approvals are much easier to obtain under the FHA.
An early summary would be to say that those are the two most basic benefits of using an FHA mortgage to purchase a house. Compared to a conventional loan, the FHA is perceived to have more heart considering the number of people it can cater to.
Here are the home loan benefits you can enjoy with the FHA
Down payments are smaller.
The two prior advantages mentioned in this blog post are what attract applicants to go for an FHA loan. But it’s the small down payment specifically that draws people. This in itself makes FHA loans most popular when stacked against many other home loans. Several surveys and studies have only pointed out that this is the primary reason for homebuyers going for an FHA. Without a doubt, this is also FHA’s most robust feature.
Lower debt ratios and credit scores
Potential borrowers whose credit scores are low need not worry. Chances are, you’re still most likely to make the cut. This is another perk to bagging an FHA mortgage. The cutoff on credit scores is much lower compared to “regular” mortgages.
Most conventional mortgages will require a credit score of at least 620 or higher. Under an FHA, those with a FICO score of 580 can put in 3.5% while those with at least 500 can pay a 10% down. Compared to a conventional loan’s 15% to 20% down, one can really feel the gap.
Borrowers can make use of gift funds as a down payment.
Several mortgage loan types permit the usage of gift funds. This is when a good friend or family member gives you funding to cover the expenses involved in your down payment. With conventional loans, borrowers are limited to a certain extent of when and how much gift funds can be used. With an FHA mortgage, 100% of one’s down payment can be derived from gift funds. This is also another advantage other conventional loans can’t offer to their borrowers. Obviously, for loanees with charitable friends and parties, this can be a good determiner as to whether or not the FHA is perfect for them.
If you’ve had to Google: the advantage of FHA loan, this blog post is a rough summary and a good rundown on what to expect. Again, as with anything else, research is the key. Don’t shy down on asking as many questions as you want as a loan is no easy commitment.