There are several ways to go about being able to finance buying a house. One of the key ones is going through an FHA loan. Several advantages come into play with FHA loans, especially when comparing them to a standard mortgage loan.
FHA Loan: What Is It?
The FHA loan stands for Federal Housing Administration loan, a program with two main benefits for people buying a home. Borrowers who have a history of problems with their credit will likely have an easier time qualifying for an FHA loan. Moreover, the down payment that borrowers under this program can make is as low as 3.5%.
Let’s take a look at how else using an FHA loan in buying a house is beneficial:
Home buyers can assume their FHA loan
What does it mean for your FHA loan to be assumable? Essentially, if you sell the house later on for whatever reason, your FHA loan can be transferred to whoever is buying the house. It should be noted that they will need to meet guidelines and requirements set by the Department of Housing and Urban Development first before assuming the loan.
The gifting of down payments can go up to the full amount
There are several mortgage loan types that allow an approved donor (like a family member) to help fund part of your down payment. Regular or conventional loans only allow for a certain amount to be gifted. However, when it comes to an FHA-insured mortgage loan, the whole down payment can come in the form of a gift.
The guidelines to qualify for an FHA loan are far more flexible
Home mortgage loans that are regular or conventional have incredibly stringent natures. Most of it stems from lenders getting government insurance. It serves to protect them from borrower default losses. When home buyers have credit issues, their last resort is usually FHA loans.
Even borrowers with scores that go all the way down to the 500s can find some hope in FHA loans. It all depends on the mortgage lenders they come across and what circumstances they’re in. Basically, bad credit does not immediately equate to disqualification from getting an FHA loan.
There is a much smaller down payment involved with getting an FHA loan
Some time ago, there was a survey conducted by way of the Home Buying Institute’s website wherein 64% of respondents said they used the FHA loan mainly because of the down payment being significantly lower. The appraised value or purchase price is the basis for the down payment. Borrowers can pay as low as 3.5% of whichever of those two is lesser.
At least 5% is usually what regular or conventional mortgage loans call for borrowers to pay. This is why the FHA program gained popularity and continues to be favored by many. Home buyers that generally don’t have a lot of savings, such as first-time buyers, benefit from this greatly.
Conclusion
There are many advantages to getting an FHA loan, such as a lower down payment and flexible qualifications. It’s also a great option for first-time home buyers and those without a significant amount of savings to pay for a large down payment.
For the best rates and service on your FHA loan, get in touch with Skyway Financial. We are a full-service mortgage company that helps homebuyers and homeowners in California, Florida, Michigan, Texas, Tennessee, and Virginia. Chat with us to get started today!
