Federal Housing Administration insures FHA loans, which are popular amongst first time house buyers because requirements are less severe than conventional loans. FHA program was designed to overcome the reaction of defaults and foreclosures. FHA mortgage lenders attain sufficient insurance and loans accessible and reasonable to people having low credit score or can only afford low down payment.
Benefits of FHA Loan Program?
Low Down Payment
Traditional loans need minimum 5% to 10% down payments, whereas FHA needs minimal 3% only. Therefore people can buy home at low down payments and start building their equity as soon as possible.
Low Mortgage Insurance
Insurance premiums for conventional mortgage are significantly higher than the FHA loans. Therefore, even a person qualifying for conventional loans applies for FHA loan program and benefits from low insurance premiums.
Better Interest Rates
Rate of interest is the same on FHA loans for all borrowers, even if they have credit issues. In general, FHA loan rates are very competitive. Thus, the credit challenged potential home buyers get qualified for loans at rates they would not get on conventional loans.
High Debt Ratios
Borrower with high monthly debt can qualify for FHA loan. Conventional loans allow new home buyers payment of 28% of monthly gross income. FHA loan allows 29% in accordance to FHA lending tree. For conventional loan, your total monthly debt payments need to be less than 36% of monthly income. According to FHA loan guidelines, people with monthly debt of 41% qualify.
Liberal Credit History
There is no requirement of minimum credit score, according to FHA mortgage guidelines. Borrowers with no or little credit history get approved. No negative credit history must be included on their report. If your bankruptcy is two years and foreclosure is three years precedent and you have clean credit history in this time frame then you qualify for FHA loan. Conventional mortgage guidelines need 2 years clean credit history and minimum of 4 years after bankruptcy or foreclosure.
FHA Loans Need Mortgage Insurance
FHA loans do not have strict standards like conventional loans, so there are two kinds of insurance premiums to be paid. One had to be paid totally as upfront or can be financed within the mortgage. The other is the monthly insurance premiums. The house borrowers need to buy will have to meet certain conditions. It needs to be evaluated by FHA-approved appraiser.
- UFMIP – One time upfront premium to be paid is 1.75% of home loan
- Annual MIP – the insurance premium will be on the basis of loan amount and length (LTV ratio).
How to get FHA Loan?
Lenders need an approval from FHA to help borrowers get FHA loan. Visit online to contact a reliable FHA loan lender and attain quotes. You can get FHA quotes from several lenders and compare the rates and make sure to find the FHA loan limits because they differ from one state to another.
NLC Loans are nationally licensed FHA loan lenders. They have been in the lending arena for more than fifteen years and helped many people buy homes. You can call them to find out if FHA loan is right for you or not.
