So, what is an FHA Loan?
Mortgages that are insured by the Federal Housing Administration (FHA) are referred to as FHA Loans. This type of loan is very popular amongst first time home buyers and those looking to buy their first home, should definitely take advantage of it.
One of the reasons why FHA Loans are so popular is because they allow down payment as little as 3.5% for almost all credit scores above 580. Though borrowers are able to qualify for FHA Loans with a credit score under 580, the lower the credit score, the higher the interest rates will be. However, with FHA Loans all borrowers must pay premiums for mortgage insurance, which protects the lender if the borrower were to default.
Requirements for FHA Loans
Borrowers that are looking to buy their home with a 3.5% down payment can only qualify if they have a minimum FICO score of 580. As stated, having lower than a 580 FICO credit score does not stop or exclude you from being able to qualify for an FHA Loan. Those with a FICO score under 580 usually need to make a minimum down payment of 10% to qualify.
Though credit score and the amount for a down payment are the main factors with an FHA Loan, the complete list of the Federal Housing Administration’s requirements can be found at their website or by contacting Cambridge Home Loan.
FHA Loan Benefits – Lesser Down Payments and Credit Score Requirements
FHA Loans have become known as one of if not the easiest loans to qualify for. With a credit score minimum of 500 and the lower interest rates, FHA Loans have become more and more popular amongst first time home buyers. FHA Loans are still open to those who have foreclosed a previous home or have previously declared bankruptcy.
In addition to the credit score and interest benefits, FHA Loans are also a type of assumable mortgage. This meaning, that if you were to sell your home before paying off the loan, the buyer could then “assume” the loan you had.
The FHA Loan program all began after the immense amounts of foreclosures and defaults on payments during the 1930s.
The FHA program was put in place to keep the housing market alive by ensuring there were affordable and accessible loans for those with not-so-great credit, all while also ensuring the lenders were protected with adequate insurance.
As low as 3% Down! Qualify Now!
The Required Mortgage Insurance
FHA Loans require mortgage insurance to protect the lender if a borrower were to default on their mortgage. Following the style of FHA Loans, the required mortgage insurance does not have strict requirements, though it does require two types of mortgage insurance premiums. One would be the monthly payment, the other is an upfront payment, which has the option to be financed within the mortgage. As long as the residence is approved by an FHA-approved appraiser, the loan can go through and the mortgage insurance can be decided on.
With the volatility of the markets, rates, and prices of real estate, you may be asking yourself, “Is now the right time to buy or