Federal Housing Administration (FHA) loans allow lower down payments, lower incomes, and lower credit scores. They make homeownership more accessible for first-time and lower-income buyers. Although there are specific requirements and limits on FHA loans, it could be the perfect mortgage option for you.
FHA loans were set up by the federal government to help stimulate the housing market and make mortgages more accessible. The FHA does this by backing up the loans, assuring lenders that they will repay the mortgage if the borrower defaults on the loan. This security allows lenders to qualify borrowers with lower incomes, lower down payments, and lower credit scores.
There are a few basic qualifications for FHA loans, including:
Other qualifications are:
While FHA loans can be ideal for many borrowers, there are some trade-offs. FHA loans require mortgage insurance. According to the FHA, “mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages.” Two mortgage insurance premiums are required, one upfront (this can be financed into the loan) and one annual premium.
FHA loans offer buying power for those that may not qualify for a conventional loan. With relatively a low down payment and a chance to start fresh in cases of foreclosure, lower credit scores, or bankruptcy, an FHA mortgage may be the perfect fit for you. If you’d like to discuss your options regarding an FHA or other loan, contact us today!