ABOUT FHA
Additional Information
FHA Benefits
- Low Minimum Down Payment 3.5%
- Allows Credit Scores Down to 580
- Higher Debt-Income Ratios
- Easier Credit Qualifications
FHA (Federal Housing Administration) loans are government loans geared for First Time Homebuyers as well as borrowers with less established credit and higher debt-income ratios.
There are many instances when FHA loans are a viable option, and in most cases the interest rates are even slightly lower than Conventional Mortgages. This is most noticeable when working with lower credit scores.
Additionally-FHA has shorter seasoning requirements surrounding Bankruptcies, Foreclosures, and Short Sales, in comparison to Conventional Mortgages.
Equally important are some of the drawbacks of FHA Loans. FHA loans are naturally more expensive than conventional loans for two main reasons. They require an upfront Mortgage Insurance Premium of 1.75% of the loan amount (typically financed), and they also require a yearly mortgage insurance premium which is .85% of the loan amount (paid monthly). Lastly, the monthly mortgage insurance premium doesn't get removed and borrowers are required to pay this fee until the loan is paid off. Unlike Conventional Mortgages, when the mortgage insurance is removed once the borrower reaches 22% equity.
As a borrower it's vital to explore your financing options and exit strategy for the property. Having a mortgage broker who understands your goals and mortgage products will save you both time and money.
