5 Reasons To Consider An FHA Mortgage - Learn about some of the advantages of FHA loans for financing a real estate purchase or refinancing an existing mortgage.
Since the early 1930s, the Federal Housing Administration has been providing federally-insured home financing to qualified borrowers. With its lower up-front costs, accommodating terms and forgiving credit requirements, the FHA loan is a popular choice for first time and low income buyers; however, you don't necessarily have to have low income or poor credit to be approved. Review the following five reasons to consider an FHA loan to see if this home mortgage program might be right for you.
1. Less Money Up-Front
FHA financing was first introduced in the midst of the Great Depression, as a way to make it easier for people to buy homes and stimulate the economy. One of the major ways in which it did this was by requiring less of a down payment when compared to a conventional loan. Down payments for FHA loans can be as low as 3.5%. Additionally, FHA loans allow for the closing costs to be paid by the seller or to be paid for as a gift from a relative, government agency or nonprofit organization.
2. Less Money Over Time
Another characteristic of an FHA loan is lower interest rates. While interest rates fluctuate, FHA mortgage rates will typically be lower-than-average.
3. Less Stringent Credit Requirement
Borrowers with less than perfect credit scores may qualify for an FHA loan. Like other loans, the FHA program still has a minimum credit score that is required for applicants. However, when compared to many conventional loans, the credit score requirement tends to be lower.
4. Flexibility and Options
There are special types of FHA mortgages that can be very accommodating to the borrower's specific needs. For instance, a 203K loan is a special FHA loan that can allow the cost of repairing a fixer-upper to be financed into the mortgage. The Federal Housing Administration also provides Reverse Mortgages, where senior homeowners can borrow from their equity to pay living expenses, and an Energy Efficient Mortgage (EEM), which, as the name implies, allows the borrower to finance the costs of making a home more energy efficient. There are even FHA programs that offer funds for refinancing and debt consolidation.
5. Higher-Value Homes Can Qualify
Many people associate FHA loans with less expensive or starter homes, but the truth is, even more expensive homes can qualify for FHA financing. FHA mortgages have a maximum loan amount that is based on the median real estate prices by county, which allows some homes in more expensive areas to qualify. If home prices in your county are higher than the national average, the maximum FHA loan amount will be higher, too.
To learn more about FHA mortgages, contact an FHA-approved lender. Be sure to ask about current FHA mortgage rates and the loan limits in your area.
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