FHA Mortgage Loans Right for You?
With so many different banking institutions offering a wide variety of loans it can all get pretty confusing pretty quickly. Questions of the day “Is an FHA Mortgage Loan Right for me?” So if it’s your first time hearing about FHA loans and you’re thinking this is the newest trend in banking you’d be pleasantly surprised to know that the Federal Housing Administration also known as FHA has been around since 1934 and in all that time they have insured over 34 million homes they also happen to be the largest mortgage insurer in the world.
- FHA Mortgage Loans are simply loans that have been insured by the Federal Housing Administration.
The Benefit of Getting an FHA Loan
So what’s the rave about FHA loans let’s say your current credit score is 580 and in a perfect world your dream home was $100,000 FHA only requires a minimum of 3.5% of the purchase price that’s only $3,500.00 for a down payment on a HOME. Whether you were in the market to buy a home or looking to rent you’d probably end up paying more up front for first, last and security on a rental instead of putting that money into your own property.
If you fall more along the lines of 500 – 579 don’t lose hope you may still meet the requirements for an FHA loan but they would require a 10% down payment.
Another plus to FHA loans is they allows for some of your closing costs to be paid for such as appraisal, credit reports, or title expenses that you may incur in buying your home which can get pretty pricey.
What are Debit Ratios?
You have your down payment Great! One of the qualifications to get an FHA loan is a look into your debit this is done in order to prevent homeowners from getting into a home they can not afford the FHA has placed guidelines requiring that your debt to income ration makes senses. For example your income is $1,000 a month and your monthly debit is $800 a month chances of you qualifying for this type of loan are pretty slim.
What’s The Catch?
Remember how I said that FHA is a mortgage insurer, well they require that all their loans carry mortgage insurance for the duration of the loan. For you the homeowner this means nothing to you besides the fact that it will be an additional expense to your mortgage payment that can range anywhere from $150.00 to $500.00.
Mortgage Insurance protects the lender from any loss they may incur in the event you can no longer pay the mortgage on the home. Mortgage insurance does not protect the homeowner. Because of this FHA lenders are able to offer loans at very attractive interest rates with more flexible qualification requirements. They are the ONLY government agency that operates entirely from its self-generated income and costs taxpayers nothing. The proceeds from the mortgage insurance paid by the homeowners are captured in an account that is used to operate the program entirely.
Who Do I go to to get an FHA Loan?
Keep in mind FHA is not a lender, They are an Insurer of mortgages. You still need to find a Lender or mortgage broker that is an FHA approved lender that can help you put together your loan for you. Every lender is different and costs, services provided and any underwriting requirements will vary from lender to lender.