The FHA loan’s main advantage is that it helps the home owner secure a better rate from lenders. Actually, these Federal Housing Administration loans aren’t loans, because the only thing they do is insure it. But this works out very well because the mortgage then has a low down payment and closing cost, not to mention the drop in credit thresholds.
In other words, the lender is able to provide lower interest rates for those who may not even have qualified for the mortgage. Thing is that the rates vary based on a person’s credit history and score. But those able to provide Federal Housing Administration insurance are pegged on a level that’s normally only available for people with a higher credit score.
Another notable difference is that lenders demand sizable down payments in case the real estate market drops further down and property values crash again. Under such circumstances, the only way to get low down payment loans is with the help of the Federal Housing Administration. It helps that the closing costs are also part of the financing.
In fact, there’s a lot more that can be done with an FHA loan. In addition to the home purchase, the finance can also include repairs and remodeling costs. Even energy saving improvements are valid expenses.
Those with a mortgage free home can apply with the Federal Housing Administration for reverse mortgages, to convert equity into cash. All these are significant advantages, but there are also certain restrictions involved. For example, there are mortgage limits based on property values that depend on the location of the property.
Another area of concern, until recently, was the number of repairs required. But these requirements have been diluted. So an old roof that isn’t leaking doesn’t necessarily have to be changed. In summary, an FHA loan has a lot of advantages that outweigh the guidelines that need to be followed.