There are many different loan programs out there for people to apply for and take advantage of, but when you consider a conventional home loan program you will need to come up with at least five percent of the purchase price as a down payment before you will be considered for the loan. Depending on the purchase price of the home, five percent, and sometimes as much as 15 percent can be a lot of money. Most of us don't just have this sort of money lying around, and so we assume that we cannot consider home ownership. Luckily, way back in the 1930's the government realized that most of us don't have this sort of money sitting around and they created the FHA loan. This federally insured loan allows for normal, every day people to buy a home for less than the five to 15 percent down payment that we would be looking at with a conventional home loan.
The FHA Loan Makes Home Ownership Possible
The FHA loan dates back to the Great Depression when people had very little money and home ownership was declining for this reason and also due to the fact that many people were losing their homes to foreclosure. The federal government wanted to boost home ownership and home construction numbers and so they derived a system that would allow for lenders to give borrowers the money that they needed with very little money down from the borrower. The Federal Housing Administration would insure the loans so the lenders would have some security, so everyone would win.
With an FHA loan you can get into a new home for as little as three percent of the purchase price as a down payment, and in some instances it could be even less. If you were going to buy a $100,000 home this means that you could be moving in by putting down just $3,000 and that is much better than the five or six thousand that you would be putting down on a home if you went with a conventional type of loan. While that doesn't seem like a huge savings, there are more savings beyond this. To make the home purchase more affordable from the start the FHA loan also has limits on closing costs so that you cannot be charged excessive fees by the lender, the broker, and the realtor but if you have a conventional loan there are not any limits as to what you can be charged in the way of closing costs. These limits can truly save you thousands of dollars just in closing costs.
An FHA insured loan is a great way to get into a home if you dream of the joys of home ownership but do not have thousands of dollars that you can pay up front to get into a home. There are a lot of great programs out there that are offered by lenders to make the process of buying a home even more affordable. Whether this is your first home purchase or you've purchased several homes in the past, these loans are a great option for you if you want to keep the process as affordable up front as possible. Why not make affordable home ownership a reality for yourself today?
