If you’re bent on finally purchasing a house, whether, after years of renting or otherwise, you may want to consider getting a mortgage under the Federal Housing Administration. This government-ensured home loan program has a credible list of advantages that are enough to swoop the dreaming homebuyer.
FHA Loan Benefits
Along with other government-guaranteed home loans like the USDA and VA, FHA is a loan type that demands a low down payment. While traditional home loans require a 10% down payment or more, the FHA can allow a borrower to deposit only 3.5% worth of a down payment. That said, the FHA lets people purchase homes and build equity a lot earlier compared to conventional loans.
FHA mortgages don’t the same interest rate for every borrower. That said, there is an absence of a penalty for those with credit issues. If an applicant is eligible for the loan, they get to bag whatever present rate there is. Generally, FHA loan rates are competitive. This home loan program provides cash-strapped homebuyers the capacity to be eligible for rates they otherwise would have never gotten on traditional loans.
Lenient Debt-to-Income Ratios
One of the most significant factors in determining whether one is qualified for an FHA loan is his or her capacity to keep paying for mortgage expenses all while existing debt is around. Still, FHA’s debt-to-income ratio is attainable to more people. One’s mortgage fees should not go beyond 35% of one’s income. Furthermore, one’s mortgage fees on top of existing debt should not go beyond 48% of their income.
Low Credit Score Requirements
Borrowers whose FICO score reaches 500 being the very least are permitted to purchase homes with a 10% down payment. Meanwhile, borrowers whose credit score is at least 580 are allowed to buy a house with the coveted 3.5% minimum down payment.
Generous Seller Contributions
Under the FHA, the allowable seller contribution is much higher compared to traditional home loans. The percentage can go as high as 6% with the FHA; a far cry from a conventional loan’s 3%. This means that sellers can take care of up t 6% worth of closing cost expenses. If a borrower is compelling and convincing enough, he or she may even have the seller cover for the entirety of the closing cost—but take this with a grain of salt as everything is always a case-to-case scenario. The seller can also pay for other out-of-pocket fees should there be any.
An FHA exclusive, homebuyers can also utilize gift funds to cover 100% of their down payments. While the FHA does have guidelines on who is allowed to help fund a buyer, it’s still assuring to know that other trusted parties may help buyers purchase their dream homes.
For more FHA loan benefits, click the link!