An FHA loan is a government-backed home loan program secured by the Federal Housing Administration or FHA. Mainly popular among first-time homebuyers, this loan program requires lower minimum credit scores, as well as down payments than conventional loans. Although the government insures the loan, you have to opt for an FHA-approved mortgage lender to get the loan.
Both first-time homebuyers and repeat homebuyers can opt for an FHA loan 500 credit score Texas as long as they meet FHA loan requirements offered by the lender. But if you don’t ever have applied for a home loan program, you may want to know more about this loan. To help you, here we have put together everything that you should know.
- An FHA loan requires just 3.5 percent down payment
You don’t need to arrange money for a 20 percent down payment when you want to apply for an FHA home loan program. For most home buyers, this mortgage loan requires a 3.5 percent down payment. It makes the FHA mortgage one of the most easy-going mortgage types available nationwide. There are very few credit restrictions on the FHA loan. And most of the lenders allow your 3.5 percent down payment to come as a gift from your family members, employer, government homebuyer program or charitable organization.
An FHA loan allows low credit scores
Unlike other loan programs, FHA loans feature some of the most flexible and forgiving credit standards. With an FHA-backed home loan, you don’t need to have perfect credit. In fact, the FHA instructs mortgage lenders to consider the complete credit history of the borrower – not just the instances of an occasional late payment or bad financial luck. Moreover, FHA mortgage rates are lower than conventional loans for people with the same credit score. It is because FHA does not add risk-based surcharges for things like lower higher loan-to-value ratios, credit scores, or condos and manufactured homes.
An FHA loan isn’t expensive
The long-term cost of an FHA loan depends on your down payment, loan size, as well as your location. The biggest cost of an FHA home loan is usually not its mortgage rate – FHA mortgage rates are often lower than conventional mortgage rates. The biggest cost is the FHA mortgage insurance. FHA mortgage insurance premiums are payments made to the FHA in order to ensure your loan against default. But if you compare the overall charge, an FHA loan is not expensive.
FHA loans aren’t just for first-time homebuyers
This loan program isn’t only for first-time home buyers. People who are going to buy their second or third home also opt for this home loan program. This loan often marked as a product for “first-time buyers” because of its low down payment requirements. But in the last decade, many U.S. homeowners have mislaid their home equity in the housing market downturn. The FHA home loan program insures mortgages for any primary residence. There is no hard-and-fast rule that you must be a first-time homebuyer to use the FHA home loan program.
AN FHA home loan program helps one to fulfill the long-cherished dream of home-ownership. So, what to wait for? Apply for the loan and buy your dream home.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.