Since 1934, homeowners have relied on FHA Loan programs provided by the Federal Housing Administration to purchase their first home.
Here are five important facts to know about FHA Loans:
FHA Loans are Secured by the US Government
The Federal Housing Administration, which is part of the Department of Housing and Urban Development, insures home loans provided by FHA-approved lenders. That means even if a borrower defaults on his or her loan, the lender is protected.
Essentially, lenders can offer you more attractive loans with lower down payments because they trust the government will insure it in case you default (meaning you are unable to pay your loan). This is why FHA loans for homeowners are a good solution for new homeowners who can’t make the standard 20% down payment on their first home.
You Have to Use FHA-Approved Lenders to Get One
The FHA requires you to purchase a loan from a FHA-approved lender before the FHA can insure it. Make sure you ask your lender if they are approved to make sure you’re able to receive this loan option. And make sure you get multiple quotes
It’s Easier to Qualify for FHA Loans
Compared to stricter conventional loan programs which lenders may offer, you don’t need an extended credit history to qualify for an FHA loan. Generally, whether you are growing your credit score or still feel the burden of student debt on your credit history, FHA loan approvals are more forgiving of imperfect financial situations.
Your Credit Doesn’t Need to be Excellent
Typically, borrowers with a credit score between 500 and 579 should expect to make a down payment on their first home of about 10 percent. If your credit score is 580 or higher, you can expect a much lower down-payment minimum of 3.5 percent.
If your score is below 500, you likely won’t be able to take advantage of an FHA loan. However, lenders have been able to still attain an FHA loan depending on the borrower’s specific credit history. Ask your mortgage assistant to see how and if you qualify for FHA loans just to be sure you’re not missing out.
There are Multiple Types of FHA Loans
For seniors over the age of 62, FHA Reverse Mortgages can assist with turning your home equity into cash to supplement social security or other limited income. There are even FHA Energy-Efficient Mortgages to help finance energy-efficient improvements to your household, which can lessen the burden of paying for your home every month.
If you want to refinance your FHA mortgage and it’s current and at least six months old, and you could reduce your term or rate, FHA Streamline Refinance could be for you. You may be surprised by the government-sponsored cost-saving solutions you may qualify for. See your credit score without impacting your credit.