Buying a home is a big step in a person’s life and usually one of the biggest purchases they will ever make. In a way buying a home can be seen as an investment as it will be your home, your children’s home, and maybe even their children’s home.
In August, sales of existing homes rose over 7 percent along with new homes being built by future homeowners. If you’ve researched mortgage loans you may have to come to find that there are many options.
The Federal Housing Administration (FHA) helps future homeowners qualify for a home loan by providing what they call ‘insurance’. The ‘insurance’ works as a loan guaranteeing that the borrower will not default on their original mortgage loan because the FHA will cover it. It is still a home loan, however it is coming from the FHA rather than a local bank down the street. In a way the FHA works as a middleman for future homeowners as they work with borrowers and lenders to come to an agreement.
If you choose to use an FHA loan you will need to pay an MIP, mortgage insurance premium, of 1 percent in advance and an ongoing fee along with their monthly payment to the FHA.
- Positive aspects of an FHA loan include:
- Better chance of a smaller down payment for a new home
- A family member, charitable organization or even an employer can provide the down payment for the FHA loan
- Chance of leniency during hard times
- Interest rates are usually lower
- A bad credit rating does not necessarily mean a borrower will not be eligible
An FHA loan does limit lender fees though; the limits vary by county and type of home you intend on buying. A single family home will likely have a lower limit than a triplex. As with any home loan you will also have customary mortgage fees for appraisals, inspections, document preparations, and more.
You’ll also need to provide information about your credit history, current income, and tax information in order to begin the application process.
FHA loans are a good option for those who may not have the best credit or who may be looking at a larger mortgage loan that a bank may not approve. An FHA loan could provide you with the backup you need to get approved for your dream home.
As of 2010 new purchase mortgages backed by FHA loans was 40 percent, more than quadruple the amount since 2005. An FHA loan could give you the ultimate push into being a homeowner as it has for millions of other Americans. If you’re still deciding on whether or not to buy a home, credit repair might be an option to consider before applying for a mortgage loan or FHA loan. AmOne can help you find the financial solutions you need. Contact our knowledgeable associates to see what options might work best for you.