The Federal Housing Authority (FHA) is a government agency that provides insurance to lenders in case of default on a loan but they are not a lender. Applicants apply for a mortgage through a lender that has been approved by the FHA. Since lenders have different fees and interest rates it is important to do some comparison shopping to make sure you are getting the right loan at the best price.
FHA loans are a great fit for a lot of homebuyers who are looking for a mortgage with a lower down payment and easier qualifying terms. There are some definite advantages to an FHA loan but depending on your situation it might not be the best fit for you. If you are considering an FHA loan there are some important things for you to consider.
Fixed vs. Adjustable rate mortgage. A fixed rate mortgage is when the interest rate remains the same throughout the life of the loan. An “adjustable rate” (ARM) means the interest rate may go up or down depending on an index which reflects the cost to the lender for borrowing on the credit markets. Talk to one of our loan consultants to find out which would be best for you.
Mortgage Insurance is required on all FHA loans and is paid in two different ways. The first premium is paid upfront when the loan is received. This premium is a small percentage of the loan amount and can be financed. The second is an annual premium although it is paid monthly and the amount varies slightly based on certain variables such as the length of the loan, the amount borrowed, and the loan to value ratio.
Credit History. FHA loans are more lenient than conventional loans when it comes to credit requirements. There is a minimum credit score required to be eligible for an FHA loan- ask your loan officer for details. The higher your credit score, the smaller down payment is required.
Lending Limits. FHA lending limits vary from state to state or even county to county depending on housing costs in the area. One of our loan consultants can give you the FHA lending limit in your county.
Financial Hardship. Those who have an FHA insured loan and suffer a financial hardship or are struggling to make payments, may be entitled to some relief options to help through a difficult time. This could be in the form of a temporary forbearance, a loan modification that would lower the interest rate or an increase in the length of the loan.
Borrowing for home repairs is another feature offered through an FHA Loan. This loan is called a 203(k) loan and is backed by the federal government. It allows the borrower to finance certain home repairs that would otherwise disqualify the property.
Call one of our loan professionals now to see if an FHA Purchase is right for you. 800-988-7793