What Is An FHA Loan – Federal Housing Administration is a branch of U.S. Department of HUD (Housing and Urban Development).
An FHA loan is a mortgage which is insured by the Federal Housing Administration. This is popular especially first time home buyers as they allow down payments of 3.5% credit scores of 580+.
A borrower can qualify for an FHA loan with a down payment of 3.5% for a credit score of 580 or more. Your credit can be between 500-579 if a 10% down payment is made.
What Is An FHA Loan
This loan is backed by the government featured with attractive interest rates and less stringent qualification.
However, an applicant must meet credit-score and down-payment requirements, proof of employment and steady income.
Benefits of FHA loan
1. Requires Low credit score and down payment
The FHA requirements for credit score and down payments are lower as compared to conventional loans. Borrowers need to qualify for an FHA loan with credit scores of 580.
2. FHA mortgage rates
The mortgage rates are lower than the mortgage rates on the conforming loans. A borrower with a credit score of 660 can get the same interest rate as would conventional borrowers with a score of 740.
3. Closing Cost
An FHA loan allows a seller to contribute more towards closing cost. FHA allows sellers to pay up to 6% of the loan amount to cover the buyers closing cost.
4. FHA loan is assumable
FHA borrower has another advantage over the conventional borrower. When an FHA loan holder is going to sell the property buyer can take sellers existing FHA loan instead of a new mortgage. It is a great option in case of the rising-rate environment.
5. FHA mortgage insurance
FHA loan has the cost related to the upfront and annual mortgage insurance premiums.
6. Borrow money for home repairs
A borrower can buy extra money for repairs to their homes. This advantage of the loan is called a 203(k) is that the amount is not based on the current appraised value of the home.
Steps to get FHA loan
1. Application for a loan
Make sure you qualify for an FHA loan. You must be able to meet the requirements given below.
- You must prove the 2 years of steady employment in the same line.
- Your credit score should be 620 or higher with fewer than two 30-day late payment in the past 12 months.
- keep in mind this loan is available only for primary residence occupancy.
- You must have some cash to pay the down payment on your loan.
2. Meet the FHA-approved mortgage near you
Ony federally approved brokers can offer these loans. To start this process you need to visit the authorized broker to get an FHA loan. You can search an FHA authorized broker through the official website of FHA mortgage loan.
3. Keep ready your money for down payment
Every home loan needs a down payment, in case of FHA loans a borrower cannot get the finance more than 96.5 percent. That means you can expect to pay 3.5 percent of the house cost up front.
4. Keep ready your documents
The documents such as employment status, saving, credit and your personal information. Remeber the documents you provide must be fair extensive.
Note: You must fill the correct details and documents in your loan application.
5. Have the property appraised
The property you are going to buy will be appraised. A lender or broker must be the person to order the appraisal on the behalf of the borrower. The appraisal cannot be ordered by the borrower.
6. Finish the loan transaction by signing the documents
Make sure that you have read everything before you sign the documents. Don’t feel afraid if you need any clarifications on anything you have doubts.
There are many approved lenders and approved brokers for FHA loan. You can apply for the FHA loan the process is free, easy and you can do it without any delay. You can approach any lender or broker for FHA loan and get the quote after that contact them directly. What Is An FHA Loan