The Federal Housing Administration started the FHA home loan program in order to encourage homeownership and create paths to homeownership for borrowers who would otherwise have a difficult time obtaining financing. FHA loans are available to both first-time home buyers and current homeowners.
There are lots of benefits to purchasing a home with an FHA mortgage loan, but ease of approval is probably the biggest draw to this type of mortgage. When researching which type of home loan is right for you, consider the following benefits of FHA mortgages.
1. More Lenient Underwriting Requirements
Conventional or traditional mortgages typically require borrowers to have exceptional credit, with underwriting guidelines usually requiring scores above 700.
FHA loan approval, on the other hand, focuses on repayment ability, job security, employment and income. As a result, FHA loans can accommodate borrowers with scores as low as 500 and past serious credit events (bankruptcy or foreclosure).
2. Small Down Payments
With a conventional mortgage loan, you will typically be required to pay upwards of 20% cash toward your home’s down payment. With an FHA loan, your down payment requirement is much lower. Borrowers with a credit score of 580 or above are required to put only 3.5% down on a purchase. Borrowers with credit scores between 500 and 579 only need to pay 10% down.
3. Gifted Down Payments Are Allowed
Borrowers are allowed to have a family member gift the down payment amount to them with an FHA loan.
4. Closing Cost Benefits
With an FHA loan, borrowers can elect to have closing costs rolled into the principal balance of the loan. These include lender origination fees, appraisal fees, initial escrow payments, recording fees and other costs due at the time of closing.
5. No Penalty for Prepayment
If you find yourself with extra cash from a tax refund or another source, there is no penalty for paying extra toward your loan or paying your mortgage off early.
FHA loans can be assumed. An assumable loan is one which allows a new borrower, after credit approval, to take over an existing loan and loan payments in the event the original borrower wishes to sell the home.
Shop FHA Loan Rates from Reputable FHA Mortgage Lenders
If you think an FHA loan might be the right mortgage choice for you, then be sure to apply and shop for mortgage interest rates with specialized FHA mortgage lenders. Some top FHA mortgage lenders, include:
- Quicken Loans
- Rocket Mortgage by Quicken Loans
- Mortgage Investors Group
For more information about FHA mortgage loans or to find out whether you qualify to purchase a new home, contact Mortgage Investors Group’s FHA mortgage lenders today. We can answer all your mortgage-related questions and help you determine the best path to meet all of your homeownership and financial goals. Call us, start a conversation with an online chat, or begin your application online today.