For many years a large slice of Americans were shut out of the home owner arena. The Federal Housing Administration (FHA) sought to change that. It came up with the FHA loan program. FHA mortgages have many advantages and FHA mortgage rates are competitive with other types. These FHA loans provide an avenue to owning a home not present otherwise for many families.
Most mortgages have several different requirements. The first relates to down payment. The majority of mortgages today require a full 20% down payment. With the price of most homes this essentially serves to exclude myriad people who have not saved this amount of money. FHA loans presented a solution to this problem.
With an FHA loan the amount that the borrower has to put down is most usually 3% of the home's purchase price. This translates to savings of often tens of thousands of dollars of down payment. This change opens up the home arena to many who were previously shut out and serves to support the price points at the entry level tier of the home marketplace.
There are other benefits of FHA mortgages. Most mortgages require minimum credit scores. FHA loans are not underwritten based upon the applicant's credit score. There are only two requirements relating to credit for FHA loans. The first requirement is that the borrower not have a bankruptcy filed for the previous two years. If so, the borrower must wait until two full years has elapsed since the filing.
The second requirement is that the applicant must not have been subjected to a foreclosure during the previous three years. This unfortunately excludes many today who have just experienced a foreclosure. They must wait three years before being able to avail themselves of an FHA mortgage.
Another great advantage of FHA mortgages relates to closing costs. Most loans require the borrower to pay all closing costs in cash. These can often add up to thousands of dollars which entry level buyers do not yet have saved. FHA loans address this by having the lender absorb have of these costs. The other half is tacked on to the principal of the mortgage.
This allows their payment over many years eliminating that obstacle to home ownership for new buyers. The Federal Housing Administration is not actually a lender. They back loans made by some private institutions allowing for usual criteria to be relaxed. Finding which lenders offer FHA loans is an easy exercise simply done by a quick online search.
FHA mortgage rates are usually similar to other fixed rate loans. FHA loans can be either fixed rate or have an adjustable rate. They provide an excellent opportunity for those just starting out to be able to buy a home. Home ownership is the greatest source of wealth for most Americans. Let an FHA loan open the door for you.
