Buying a home is a dream for many individuals. Unfortunately, with the trouble the housing market endured a few years back, lenders started requiring large down payments and near perfect credit in order to award a loan. While some lenders have begun to loosen their requirements a bit as the housing crisis is further in the rearview mirror, it can still be tough to get a conventional loan. That is why many people turn to an fha loan instead.
An FHA mortgage is a loan provided by the Federal Housing Authority. It has been the go to loan for many people who were looking for an affordable mortgage in the past. It still remains popular for a wide variety of reasons. First off, a typical FHA home loan will only require a borrower to pay as little as 3.5% for their down payment. This is less than conventional loans that require anywhere from 5% to upwards to 20% for a down payment.
In addition, while conventional loans are virtually impossible to get with poor credit, people with credit scores as low as 580 can usually qualify for low-interest rate loans. Even people with credit scores lower than 580 may still be able to get an FHA home loan, however, it may require a higher down payment, somewhere in the range of 10%.
FHA lenders are also known for offering borrowers low fees. Many conventional loans have a ton of extra fees as well as early payoff penalties. Loans provided by the FHA are less complicated and are designed specifically to offer low-fee options for less than perfect borrowers.
Lastly, whether an individual has had to file for bankruptcy or has had a foreclosure in the past, this doesn’t necessarily disqualify them from getting an FHA home loan. Often times, it may result in a higher down payment being needed, but approval for this type of loan can still be achieved.
As you can see, with easier fha loan requirements, competitive interest rates and affordable fees, it’s easy to see why these particular loans have been and continues to be the popular choice for many people looking to buy a house. If you thought home ownership was impossible, given your budget or your past financial woes, it may be time to look to the FHA for a home loan.