Every growing family strives to settle down one day in a home that can last them for generations – or at least, for as long as it suits their lifestyle. Buyers with a good credit score, along with enough savings to meet the down payment find it easier to get a good mortgage, but it can be trickier for others who don’t make the cut.
With the increasing prices in the housing market, mortgage programs like the Federal Housing Administration (FHA) loan make home-buying a more accessible option to borrowers who cannot afford the standard 20 percent down payment in most real estate. This makes it a perennial choice for first-time home-buyers, thanks to the loan’s lower credit requirements.
What Exactly Is an FHA Loan?
This type of mortgage is insured by the Federal Housing Administration, which works by insuring the loan issued by lenders such as banks, credit unions, or nonbank corporations.
Borrowers with only a credit score of 580 or higher can qualify for FHA loans and will only need to pay 3.5 percent of the down payment, though the catch is that you will have to pay for FHA mortgage insurance to protect lenders against risks. As for the premiums, FHA-approved loans require borrowers to pay for the following:
- Upfront Mortgage Insurance Premium – The borrower will need to pay 1.75 percent of the loan’s total cost once it has been approved.
- Annual Mortgage Insurance Premium – This refers to the additional fee that safeguards the lenders if you default on your FHA loan, which depends on your long-term loan amount, and how much you down. Typically, the range varies between 0.45 to 1.05 percent monthly.
What Are the Different Types of FHA Loans?
Not all FHA loans are made the same, so there are different versions designed for specific needs, such as the following:
- 203(b) Loans
- 203(k) Loans
- EEM Loans
The Bottom Line: Why FHA Loans Are the Go-to Choice of First-Time Home-Buyers
FHA loans are a good choice for borrowers who haven’t built enough credit nor savings to meet the standard requirements for other mortgage programs. Keep in mind that it is only the best option for those with poor credit and little-to-no funds since the cost of paying for mortgage insurance can be costly, plus the cap on the loan limits can be too low for someone looking for high-dollar real estate purchases.
Why Choose Loan Solutions Now?
Getting the best deal for your mortgage can be tricky for any borrower; that’s why working with client-centric mortgage brokers in Louisville, KY, FL and CO,, can make all the difference in your financial situation.
Whether you’re looking for adjustable-rate mortgages, FHA loans, and more, our agency can take the drudgery away from the process and help you get the best mortgage rates possible. Contact us today at (502) 327-9770 to get instant rate quotes! We can guarantee that no matter your situation, we have the right solution for you.