How Can Home Buyers Benefit From FHA Loans?
Purchasing a home is an essential undertaking for first-time purchasers as well as existing homeowners. FHA loan offers a lot of incentives and advantages, making this kind of loan a perfect financing option.
Let us shed some light on the following about FHA loans:
- The down payment
- The interest rate
- The objective of FHA loan
- Home appraisal
- Myths about FHA loans
FHA Down Payment:
The primary and most essential expense that one can incur when purchasing a house is the down payment. Compared to other kinds of home loans, FHA loans have a lower down payment requirement, only 3.5 percent of the sales price. It is perfect for the first-time home buyers as they typically do not have the money for a more substantial down payment. When individuals spend less money for a down payment, they can use the savings for other expenses related to owning a new house, like drapes, blinds, curtains, etc.
The Interest Rate of FHA Loan:
The current market conditions and other economic factors determine the direction of how the interest rate fluctuates at any given time. It is essential to pay attention to the interest rate as it directly impacts the monthly mortgage payment. A low and fixed interest rate gives homeowners significant monthly savings, freeing up money to be utilized for other expenditures.
The interest rate on FHA loans is generally lower than conventional loans. Insured by the HUD, it is backed by the federal government in the form of mortgage insurance premiums. Having this insurance assures lenders that in the event of future default by the borrower, they will not be in a losing position; the mortgage insurance premium is their protection.
FHA Loan Application:
FHA loan is the most lenient among all loan programs in the market. FHA qualification guidelines are straightforward. The objective of the FHA is to make loans reasonable for many house buyers; hence, it’s primary focus is the income and credit history of the borrower. If an applicant has below-average credit, that individual can still apply for an FHA loan given they have had no delinquent payments for a year as a minimum from the date of application Borrowers with low credit scores can apply much simpler for an FHA loan as opposed to conventional ones that typically need a least score of 620.
Property Appraisal Report
All FHA loans require a property appraisal to determine its value and ensure its security. An assessment may not be required but is highly suggested. An appraisal is an expert assessment of an independent third party, the appraiser, providing the value of the property concerning the sales price. FHA appraisal report goes beyond the property value itself. The appraiser is also required to inspect the property to meet HUD’s minimum requirements for safety, soundness, and security.
A Few Myths About FHA Loans
FHA loans are a great option that allows numerous potential first-time home purchasers with past credit issues to break into the American dream of homeownership. Seller concessions are high, and costs are low in today’s market standard.
The days of the subprime market for a hundred percent financing are gone and nothing but a thing of the past. FHA is the only viable option for several prospective purchasers to get a mortgage. Also, thousands of house owners who purchased houses in the past utilizing such subprime mortgages are now facing interest rate increase! The following are a few myths about FHA loans that stop people from applying.
FHA Loans Take More Time To Get Approved:
The reality is that in today’s world of paperless processing and automated underwriting, FHA loans take no longer than conventional ones to get approved. The time frame to get approval is the same as a conventional counterpart.
FHA Loans Need A Lot Of Extra Paperwork:
The documentation needed for an FHA loan is almost precisely very similar to that required for a conventional one. FHA requires just a few extra papers more than a conventional loan and the additional documents that FHA needs take little additional time and are there to protect you throughout the process.
FHA Loans Cost More Than Conventional Loans:
The interest rates of FHA loan are based upon the similar market factors that conventional ones are based on. HUD strictly defines the closing costs of FHA loans as to what can be charged to a borrower. The only thing that might make an FHA loan cost more than a conventional loan is the mortgage insurance premium.
If you are a home buyer looking for mortgage options, an FHA loan is worth considering. With low rates, low closing costs and high sellers concessions, getting an FHA-insured loan might be the way to go when financing your home purchase.
Benefits of an FHA Loan
When purchasing a home, an FHA mortgage is an attractive option for anyone who qualifies for the program. The opportunity to come up with a lower down payment and the reduced/limited closing costs is a great benefit to any home buyer. These are just part of the deal you get with an FHA mortgage:
- Easy to Qualify for;
- Guaranteed by the government making you more attractive to FHA Lenders;
- Don’t require a large down payment;
- Low closing costs;
- Predictable monthly payments with fixed interest rates;
- Insured by the Federal government.
Every loan scenario for every borrower comes with its own set of circumstances. Working with a lender that has the experience that understands your unique situation is very important. Having the ability to assist you in finding the right mortgage loan that best fits your need is the most important decision you should take when choosing a lender in buying or refinancing a home.
Hanovermortgages.com is here to help you. Contact us by completing the simple form on this page or call us. We’d be happy to review your situation and let you know how an FHA mortgage loan benefits you.
You may also want to research U.S. Department of Housing and Urban Development for an overview of the FHA Loan Program.