Want to buy a home but are worried you won’t qualify due to a lower credit score or not having money set aside for a down payment and closing costs? An FHA loan might be right for you! But what is an FHA loan? Here is everything you need to know about the basics of FHA loans.
FHA stands for Federal Housing Administration, the government agency founded by President Franklin D. Roosevelt to help make homeownership more accessible. An FHA mortgage is a loan that is insured by the Federal Housing Administration and issued by an FHA approved lender. Thanks to the financial security this guarantee offers lenders, it allows them to offer options to borrowers who might not qualify for a conventional loan with stricter requirements.
Conventional loans are different from government loans in that they are not backed by a government agency. Requirements for qualification for a conventional loan are much more rigid since the lender is taking more the risk when issuing this type of loan. This isn’t the only difference, and each type of loan has its own benefits and drawbacks.
The pros of FHA loans include:
· Lower down payment
· Lower credit score requirements
· Higher DTI ratio considered
The cons of FHA loans are:
· Mandatory upfront and monthly mortgage insurance
· Stricter appraisal requirements
· Loan limits that might not allow for the purchase of more expensive homes,
If you’re a first-time homebuyer or someone without a pristine credit score, or a significant down payment, you may want to consider an FHA loan. To find out more about how FHA loans work and how to qualify for one, contact us today. One of our Loan Originators will be happy to answer your questions and walk you through a smooth mortgage process.
Homestead Funding offers exceptional customer service and a convenient mortgage process. Whatever your financing needs, our goal is to exceed your expectations.