FHA loans have been helping first time home buyers become homeowners since 1934.
FHA loans are government mortgages that are insured by the Federal Housing Administration.
There are numerous benefits to taking out an FHA loan. You can have a lower credit score and a low down payment with flexible financing guidelines.
Aside from those two factors, there are a slew of additional benefits that most borrowers aren’t aware of.
Read on to learn if an FHA loan could be the solution you’ve been looking for, from credit benefits to cost savings.
Low Down Payment
The low down payment requirement of an FHA loan is one of its most appealing features.
Finding a lump sum of cash large enough to make the down payment on a house – which is typically 20% – may be a daunting task for many people, and it is commonly the largest roadblock to homeownership.
- FHA only requires a 3.5% down payment!
If you don’t have a down payment, you can try applying for down payment assistance or get a gift from a family member to pay for the down payment.
Easier to Qualify For
FHA loans are alot easier to qualify for than a conventional loan. The minimum credit score required is much lower, and the debt to income ratio requirements are more lenient.
Debt to income ratio:
Your Debt-to-Income (DTI) ratio is a calculation that compares your monthly debt payments to your monthly earnings. You divide your monthly gross revenue by the sum of your monthly bills.
A lower debt-to-income ratio shows that you can easily pay off previous debts, making it less risky for the lender.
- Because you can acquire an FHA loan with a debt-to-income ratio of 56% or less, you have more flexibility.
When it comes to credit scores, each loan type has its own set of requirements.
To get a conventional loan, you’ll need a credit score of around 620.
The rules for an FHA loan, on the other hand, are different.
- To qualify for an FHA loan, you simply need a credit score of 580 or higher.
If you’re concerned that your credit score isn’t high enough, or if you’re trying to improve it gradually, this provides you some freedom.
Why waste time and perhaps lose out on the home you really want by attempting to improve your credit score? Instead, apply for an FHA loan.
Interest Rates are Lower on an FHA
FHA interest rates are lower than conventional rates. Even Fannie Mae’s greatest first-time home buyer program, Home Ready, will have a rate that is nearly.5% to 1% more than FHA.
Your interest rate will be influenced by the following;
- Your credit score
- The type of property being financed
- Your debt to income ratio
- The amount of down payment
- The amount you are borrowing
These are all factors that will determine what interest rate you’ll be offered.
Refinancing an FHA loan is easy
If you’ve already got an FHA loan, you can refinance with an FHA Streamline.
FHA Streamline is a good option if you’re not looking to take cash out. In other words, if you are just interested in lowring your rate then the streamline is a great option.
The FHA Streamline Refinance program gets its name from the fact that it allows borrowers to refinance an existing FHA loan quickly. The Streamline option saves borrowers time and money by avoiding a lot of paperwork and an appraisal.
Read: Refinance an FHA loan
Are you ready to apply? Start the process by completing the form below.
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