There are many different types of home loan programs available to help you finance your new home purchase. Spending time researching the different options available can be a profitable exercise. There is one type of program that can benefit you significantly in the financial sense – and that is the FHA home loan program.
Although this program benefits first-time homebuyers, anyone may apply for this type of loan. An FHA loan can be used not only to purchase a new residence, but also to refinance and existing home mortgage.
The acronym FHA refers to the Federal Housing Administration. This is the agency that provides FHA home loans.
What are FHA Home Loans?
One of the characteristics of an FHA home loan is that you are not borrowing money from the FHA. You’re actually borrowing money from a bank. However the loan itself is supported and insured by the FHA.
Due to the fact that the FHA insures your mortgage, there are less stringent qualifications that apply to obtain the loan. You don’t need an excellent or even good credit score in order to qualify.
Interest Rates and Down Payment
You must have at least a 500 credit score in order to qualify for an FHA home loan. However, a minimum 580 score is required to qualify for the minimum down payment of 3.5%. If you don’t meet this criterion, you’ll be required to provide a down payment of 10% on the mortgage. However, some lenders may require a score of 620 or greater in order to qualify.
In order to be eligible for an FHA loan, you’ll need to have lawful residency status in the United States, a Social Security number, and be 18 years of age or older. In addition, the lender will verify your credit rating, income, assets, and liabilities to determine whether or not you meet particular criteria for a home purchaser. There are also typically no maximum income caps on FHA loans.
After doing some research, you may determine whether or not an FHA loan product is the right vehicle for you to use for your new home purchase. Know your options and the terms of your proposed loan before moving forward with a home purchasing decision.