5 Must-Read Facts when Considering an FHA Home Loan
You’ve heard your homeowner friends talking about FHA home loans, and you’ve been wondering if it’s the right move for you; but first, you’re probably wondering what an FHA loan even is.
FHA home loans were designed to assist homebuyers in fulfilling their American dream of homeownership. They are loans insured by the Federal Housing Administration, which means more advantages for home buyers wanting to purchase a home, but don’t necessarily qualify for a conventional loan.
1. You need an FHA-approved lender
You can’t just talk to any lender about an FHA loan. Considering FHA loans are backed by the government, any lender approving an FHA loan must meet specific standards. Consider asking trusted friends or your realtor if they know of any reputable FHA-approved lenders – you don’t want just anybody!
2. You don’t need great credit to be approved for an FHA loan
So you’ve gone on Credit Karma recently and learned your credit score is a 590, and now you’re feeling a bit discouraged. Luckily, that’s one of the reasons why an FHA loan is so appealing to most people. If your credit score is 580 or above, you’ll potentially qualify for a down payment as low as 3.5%.
If your credit score ranges from 500-579, you could still qualify; however, you may need a minimum down payment of 10%.
If your score is less than 500, your chances of being approved haven’t gone completely out the window but you will need to speak to a personal loan consultant regarding details on how to still be considered.
3. You don’t need to be a first-time homebuyer to qualify
When some people think of FHA home loans, they assume you have to be a first-time homebuyer to qualify, but this assumption is completely false. Maybe this is your second time around the home buying process and you need assistance making it happen; an FHA loan could be a great option to consider. Remember, it was designed to help people – including non first-time homebuyers – regain access to homeownership.
4. Your mortgage insurance is part of your monthly payment
If an FHA loan sounds too good to be true; it isn’t, but you want to speak to your FHA-approved lender regarding the two mortgage insurance premiums you’re required to pay.
The first premium – 1.75% of the home loan – will be expected upfront, unless you opt to roll it into your mortgage.
The second is known as an annual premium – you’ll actually be paying it monthly as part of your mortgage payment – and it is based on a few factors: loan-to-value (LTV) ratio, loan size, and loan term.
5. You won’t have to face a financial hardship alone
The beauty of an FHA home loan is you aren’t in it alone. FHA-insured loans have options to help you get out of temporary financial challenges that may occur. For example, your FHA-insured loan means you could be approved for a monthly mortgage payment reduction, or other financial relief options. The thought of homeownership is a lot less scary when you know there are people who understand life isn’t always perfect.
Believe it or not, there are way more advantages to FHA home loans. Speak to a personal loan consultant at New America Financial today to determine if an FHA home loan is right for you.