FHA Mortgages and You…
If you are in the market for a mortgage, chances are you have come across these three letters in your travels: F.H.A. The FHA Home Loan is a mortgage product that is insured by the Federal Housing Administration, allowing lenders to offer competitive rates, low down payments, and easy credit qualifications. The FHA has been offering this program since 1934 in order to help boost the housing market and get people into home ownership.
So why would you want an FHA loan for your home purchase? Why wouldn’t you? The following guide will give some pros and cons to the program that you can speak with your mortgage professional about!
Flexible Credit Qualifications
FHA is one of the few options available for borrowers with lower FICO scores and some other negative credit issues. The loan is available to clients with scores as low as 580 which allows those who are building their credit back from a troubled past to get into home ownership if the time is right. The loan program also is more lenient with past delinquent debts than other options. Charged-off accounts may not need any further resolution and the waiting period since a past foreclosure can be minimized in the right scenario.
Low Down Payments:
Gone are the days where you needed 20% down for a mortgage, though there are advantages for doing so. But that goal is an elusive one for many. FHA allows a down payment of only 3.5%, meaning you can get into your home for slightly more than First-Last-and Security would be on a rental. Additionally, the down payment could be given from a relative who’s looking to help you along the way, even without them being attached to the loan long-term!
Maximize your purchase power
FHA allows you to use more of your income towards your home payment than nearly any other loan program. If your goal is to get into a more expensive property than what other loan options qualify for, the FHA loan may be an outlet to get your preapproval amount even higher!
While the existence of Private Mortgage Insurance (PMI) allows for many of the great benefits that the FHA loan has, it can be a pesky draw back as well. As the borrower, you would pay the PMI each month as long as you have the loan. FHA has lowered the premiums in recent months, making this a more affordable policy. The FHA also allows for streamlined refinancing as the changes are made to the loan program, meaning it can be relatively easy to take advantage of lower PMI premiums should they become available.