FHA mortgage loans are among the easiest for borrowers to qualify for. If you are seeking a mortgage but your credit is less than perfect, you should definitely consider an FHA loan – It may be much easier for you to qualify and can save you a lot of money as well. Private financial institutions fund FHA Loans however they are backed and insured by the Federal Housing Administration or the ‘FHA’. The lender is basically covered in case you default on the loan.
Here are some of the main advantages of an FHA over a standard conventional loan:
1. LOW DOWN PAYMENT -You only need 3% down in order to qualify rather than the 10% or more when dealing with banks or other ‘conventional mortgage products – the down payment can also be a ‘gift’, meaning you are not required t pay it back.
2. 550 MINIMUM CREDIT SCORE- Lenders have tightened a bit from requiring borrowers no minimum FICO score. Currently you’ll need at least 550 FICO to qualify. Remember, the lender who issues the FHA loan is backed by Department of Housing and Urban Development, so there is no risk to the lender once you qualify for an FHA loan.
3. YOU’LL SAVE MONEY OVER THE LIFE OF THE LOAN – FHA interest rates are very competitive and are typically lower than conventional loans. This could easily equate to saving tens of thousands of dollars if you stay in the home for the life of the loan.
4. EASIER INCOME QUALIFICATIONS – FHA allows up to 35% of your gross monthly income toward your total mortgage payment. Conventional loans usually allow only 29%.
5. OTHER INCENTIVES – FHA offers borrowers other incentives to take out loans such as foreclosure protection as well as cash incentives for making your house more energy efficient.
So what are you waiting for!
FHA loans are perfect solution for borrowers that may have had bad credit in the past but are now working and meeting current bill obligations.