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An FHA mortgage may be right for you if your credit does not meet the requirements for a conventional loan, or if you have limited cash for a down payment.
1-What is an FHA loan?
An FHA loan is a US Federal Housing Administration mortgage insurance backed mortgage loan that is provided by an FHA-approved lender.
FHA insured loan have always played a very important role in helping low-income Americans borrow money to purchase a home, otherwise they would not be able to afford it. Therefore, FHA insured loan is more geared towards new house owners than real estate investors. Moreover, FHA insured loan is different from traditional loans in the sense that the house must be owner-occupant for at least a year.
A Federal Housing Administration loan has more flexible lending requirements than conventional loans. Because of this, FHA mortgage interest rates may be somewhat higher. The buyer will also have to pay monthly mortgage insurance premiums, along with their monthly loan payments. FHA loans come in 15- and 30-year options.
2-FHA mortgage insurance
All FHA loans require mortgage insurance premium irrespective of the size of the mortgage, down payment, and credit score. The FHA employs a two-tiered mortgage insurance premium schedule. To obtain mortgage insurance from the Federal Housing Administration, an upfront mortgage insurance premium equal to 1.75% of the base loan amount at closing is required, and is normally financed into the total loan amount by the lender and paid to FHA on the borrower's behalf. There is also a monthly mortgage insurance premium which varies based on the amortization term and loan-to-value ratio.
So the Federal Housing Administration insures FHA loans. The FHA qualification process may be easier as it has more flexible down payment and credit requirements.
3-FHA loan benefits and considerations
👉FHA down payments can be lower
An FHA mortgage may require a down payment as low as 3.5 percent of the total payment. The interest rate may be somewhat higher than that of a conventional mortgage.
👉Required credit scores for FHA loans are lower
Home buyers can qualify for FHA loans without having a long credit history or good credit score.
4-FHA loan requirements and qualifications
👉FHA loan limit
FHA home loans have maximum mortgage limits that vary from states and counties.
👉FHA down payment
FHA loan guidelines require a minimum down payment of 3.5 percent.
👉FHA property requirements
FHA loans require that the home being purchased meets certain conditions and is appraised by an FHA-approved appraiser. New FHA loans are available only for homes that will be used as the buyer’s primary residence.
If you want to purchase a home and are suffering from the problem of being unable to borrow money due to low income, you might as well try the FHA program , and our Professional mortgage Agent will customize the most suitable mortgage program for you according to your situation.
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This article was edited and compiled by AAA LENDINGS, the copyright belongs to AAA LENDINGS website, it doesn't represent the position of this website, and is not allowed to be reprinted without permission.
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