If you’re in search of an affordable mortgage, then you’ll undoubtedly come across FHA loans. While traditional home loans require a good credit score and a 20% down payment, FHA loans allow first-time homebuyers to put as low as 3.5% down payment. This is one reason many homebuyers choose this type of mortgage.
But before you advantage of FHA loans, there are eight facts you need to know about FHA Loans Plano.
FHA is not your lender.
The government agency Federal Housing Administration is not the one who will lend you the funds, but they are the one who insures the loan to minimize financial risks lenders are willing to take by approving your loan. There will be an FHA Mortgage Insurance since you’re paying less than the standard down payment allowed in mortgages.
FHA Loans allow low down payment and even down payment gifts.
Traditional mortgages will ask for 20% down payment, but FHA loans allow 3.5% down payment from the purchase price – letting you buy a house with little upfront payment. Such loan type also enables you to accept down payment gifts which most conventional lenders don’t allow.
These are easier to qualify for.
You don’t need to have a perfect report and FICO scores just to get approved for an FHA loan. As long as you qualify for the loan and is financially stable enough to pay for the down payment and monthly mortgage, you can get a shot in securing an FHA mortgage.
You can improve your credit score to qualify for an FHA Loan.
While you can get approved with bad or poor credit, you still need a decent credit score to be eligible for a mortgage. To start, make an effort to check your credit report, dispute errors, and discrepancies and make sure to pay your debts on time.
You can get a 15-year or 30-year fixed rate FHA mortgage.
FHA loans can either be a 15-year or 30-year fixed mortgage. Choosing a shorter period enables you to acquire home ownership faster and dodge some interest costs. However, you’ll need to pay higher monthly mortgages since you’ll be spending the same amount in half the time as opposed to a 30-year fixed-rate FHA loan.
It can help you finance home upgrades and repairs.
When the house you wish to buy has a bit of a fixer and upper, an FHA loan or refi can help you finance the project. For starters, you can avail the Energy Efficient Mortgage. You need to find a mortgage lender that approves “Title I” loans.
You get to enjoy lower mortgage rates.
FHA loans typically have lower interest rates and closing fees compared to conventional loans. You only need to negotiate with an FHA-approved lender so you can pay lower mortgage rates throughout the loan.
FHA loans have strict guidelines when it comes to home inspections.
Just because you got approved for an FHA mortgage doesn’t mean you can already buy any house. It needs to pass the home inspection made by a US HUD-approved appraiser.
Good Read: The FHA’s Minimum Property Standards
FHA mortgages may be the easiest home loans you can apply for, but that doesn’t mean it is already the best mortgage out there for you. Consider the pros and cons, explore other loan options and compare rates before settling on a single mortgage program.