Generally speaking, FHA loan is a type of a mortgage loan that is being issued by the Federal Housing Administration. These days, this type of loan is extremely popular among buyers, especially among those, who are buying a property for the first time, seeing that loan conditions are far less strict than in other cases. In fact, a borrower will be able to qualify for the FHA loan with a down payment of only 3.5% as well as a credit score of 580 or above. Furthermore, the score of the borrower may be between 500 and 579 if he makes a 10% down payment. However, one must keep in mind that the lower the credit score is, the higher the interest rate will be.
The above-mentioned FHA program was designed after the wave of defaults and foreclosures that took place back in 1930s. It was meant to provide mortgage lenders with reliable insurance and to aid in stimulating the real estate market through making loans more affordable and accessible to people with smaller than stellar credit or a lower down payment. Basically, the federal government insures loans for lenders, who are approved by the FHA so as to lessen the risk of losing if a borrower is going to default on his mortgage payments.
Advantages of FHA loans – less strict credit score requirements and lower down payments
In most cases, the FHA loan is the most straightforward way to go, since you can qualify with a lower down payment as well as imperfect credit score. When it comes to FHA loans, these only require a 3.5% down payment instead of the traditional 20%. Furthermore, even a borrower with a score that is as low as 580 could qualify for FHA loans.
People, who are unable to afford investing 20% as a down payment and do not have a perfect credit score, should definitely learn more about FHA loans, as it is the most viable option for them.
In addition, there is another benefit when it comes to FHA loans – these loans are assumable, which means that if you wish to sell your house, the buyer will assume the loan that you have. Even individuals, who have bad or low credit score, went through the bankruptcy or even were foreclosed upon, could be able to qualify for FHA loans.
Mortgage insurance is necessary for FHA loans
Sure enough, there is always a catch – seeing that the FHA loan is not as strict as other options, it will require two types of mortgage insurance premiums – one will be paid in full and upfront (or it could be financed through mortgage) and the other will come as a monthly payment. Additionally, FHA loans will require a home to meet certain conditions and will need to be appraised by an approved appraiser.
How can you get an FHA loan?
Finding FHA lenders and shopping for special mortgage quotes for FHA loans can easily be done through LBC Mortgage Solutions. Simply submit your loan request and you will get instant quotes from the marketplace that is full of lenders. It is free of cost, straightforward.