For many homebuyers, choosing the right mortgage is a never-ending process. If you are going to be a first-time homebuyer, an FHA loan is likely to grab your attention more. The Federal Housing Administration insures the loan to help millions of Americans to purchase a home with a low-interest rate. The loan is perfect for borrowers who cannot qualify for traditional loans. Nevertheless, many borrowers are not aware that FHA-backed home loans are quite beneficial.
The advantages of FHA loans make the option appealing to the borrowers. Because of the low down payment requirement, first-time homebuyers can benefit. When the FHA government home loans bad credit in Texas has a 3.5% down payment, the initial home purchase is cost-effective. The borrowers can gather funds for the down payment from the gifts, savings, and down payment assistance grants. In addition to the context, the loan also needs a low credit score. It is a great opportunity for borrowers with non-traditional credit history. If you fall into a similar category, you need to keep certain things in mind. Let us go through the following pieces of information here.
Pros of FHA Government Home Loan
FHA loan is beneficial to many home buyers because the loan is not difficult to get approved. The credit requirement for the FHA home loan is not strict and the borrower can utilize a 3.5% down payment. When the FHA mortgage can work with 500 or 580 credit scores, the traditional mortgage needs more than 620 credit scores for qualifying. Even though the FHA mortgage insures the mortgage, the borrower still needs to pay a certain part through the private mortgage insurance or FHA mortgage insurance. Hence, the insurance is paid as a small payment on a monthly basis and a one-time payment during the loan closing. The FHA mortgage insurance can be canceled if the loan-to-value ratio drops below 78%. Additionally, your creditworthiness fixes the down payment and value of the loan.
FHA Mortgages are Assumable
Being more beneficial than the traditional loans, FHA mortgages are assumable. When the time for selling comes, the buyers can choose the sellers’ current FHA loan in the place of opting for a new mortgage. When the borrowers are worried about increasing interest rates, the sellers can find the situation advantageous. Of course, the FHA loan is not simple. When the buyers must meet the mortgage requirements, they are bound to choose larger down payment based on the seller’s equity.
Why FHA Home Loan is the Right Option
Who doesn’t know that homeownership is a dream to many? Now, the dream is followed by a set of responsibilities. Not do you put down 3.5% of the loan value but you also follow a less stringent rule for credit scores. The minimum credit score to allow a 3.5% down payment is 580. However, the lowest credit requirement is 500 and the borrowers can opt for a 10% down payment at this time.
Before buying a home, an American citizen faces a huge amount of pressure. Every one of us dreams of owning a house but a wrong mortgage can ruin things. If you need further help in understanding whether FHA loan is a good option, get help from a lender!
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.