Lots of homebuyers are confused by all the terminology and different types of mortgages that are out there. Jumbo loans, Fannie Mae, FHA, VA loans, adjustable and fixed-rate loans. It all seem very overwhelming.
In this brief article, we're going to look at FHA loans and how they can help almost anyone to purchase a home.
The Federal Housing Administration (FHA) was created in 1934. It sets standards for housing construction and guarantees loans that are handled by private lenders.
An FHA loan is generally a lower interest rate, lower down payment, and a better home than conventional home loans.
To qualify, you need a credit rating over 500 with a 10% down payment or over 580 to put down 3.0% on a home.
There is a premium added to the loan. For an FHA loan, it's 1.75% of the loan upfront and 0.45% to 1.05%. The interest rate on an FHA loan is fixed whereas a conventional loan can be either fixed or variable.
One of the strengths of an FHA loan is that house needs to be inspected by a certified FHA inspector. This ensures that the home is as valuable as the documents say it is and that it doesn't have any fatal flaws. The house must meet HUD guidelines which are very strict.
FHA loans are available to those who have filed for bankruptcy or even had a foreclosure. You will need to rebuild your credit and there is a specific period of time, but it can be done.
In short, an FHA loan is designed to make it easier for homebuyers to get a quality home with an affordable loan.
Many lenders offer FHA loans or you can start at the FHA's website to find national mortgage brokers that can help.