When it comes to mortgages, homebuyers have a number of viable options from which to choose from. From conventional mortgages to VA loans and everything in between, knowing which type of home loan is right for you can be challenging. For many homebuyers, an FHA mortgage is an option worth considering.
Specifically, an FHA loan is a type of home loan that is offered by the Federal Housing Authority. This type of mortgage offers a guaranteed, steady interest rate throughout the repayment term of a loan, in addition to other benefits. If any of the following apply to you, an FHA mortgage could be a good option.
You Don't Have a Lot of Money For a Down Payment
Saving up money for a "traditional" 20% down payment on a new home isn't easy for all buyers. On a $150,000 house, that would mean putting $30,000 down -- and that's not even counting any closing costs or other expenses related to buying a home.
For those who aren't comfortable with making such a large down payment, an FHA loan can be a great choice because buyers using this type of mortgage can put as little as 3.5% down on their home. This can make it a lot easier to afford the home you want, though keep in mind that you may need to pay mortgage insurance until you've paid off 20% of your loan.
You're a First-Time Home Buyer
FHA loans are not exclusively available to first-time buyers, but they are an especially popular option among first-time buyers because of their low required down payment and guaranteed interest rates. If you're a first-time buyer looking for a predictable, steady loan with no surprises, this is worth checking out.
Your Credit is Less Than Ideal
Getting approved for a mortgage with less-than-ideal credit is challenging. Even if you get approved, you might end up with a higher interest rate. Fortunately, FHA loans have low minimum credit requirements, so you can have poor credit or very little established credit history and still be able to get approved for a reasonable interest rate.
Overall, FHA loans are a great choice for those who don't have a lot of money saved for a down payment or who have less-than-perfect credit. A popular option among first-time buyers especially, this mortgage option is worth talking to your financial advisor or loan specialist about as you prepare to buy. Visit a mortgage broker, such as Cornerstone Residential Mortgage, for more information.