Posted on: 17 November 2018
When you buy a house for the first time, you may be confused over your mortgage options. There are different loans on the market, and you'll want to compare them so that you get the best fit for your finances. An FHA loan could be your best choice, and it's a popular option for first-time home buyers. Here are some details about this type of loan.
An FHA Loan Is Backed By The Government
An FHA loan is a loan that's insured by the Federal Housing Authority. The government has regulations in place for creditworthiness, down payment needed, and other qualifying criteria. Although it's a government-backed loan, you can apply for an FHA loan through many traditional lenders such as your local bank. The advantage of choosing an FHA loan is that the loan is usually easier to qualify for, so it's a way for new home buyers and people with lower credit scores to qualify for a mortgage.
The Loan Requires A Lower Down Payment
The down payment required for a government loan is usually less than what you would pay with a conventional mortgage. The down payment percentage is determined by your credit score, so the better your credit, the lower your down payment. Also, your down payment can come from a gift or a federal grant, which makes it much easier to come up with the cash needed for a down payment on your home.
You Can Qualify With A Lower Credit Score
Your credit score is important when you apply for a mortgage. If your score isn't high enough, you may not even qualify for a conventional mortgage. If you do apply, the interest rate and down payment might be so high that you can't get into a new home. You can qualify for an FHA loan with fair credit, although other factors come into account too, such as your income, employment history, and amount of other debts.
The Loan Terms Might Be More Favorable
An FHA loan often has a lower interest rate than a conventional loan which means your monthly payments could be lower. The length of the loan could be longer too, and although that increases the amount of money you pay on your house, your monthly payments are lower. This makes it easier to pay a mortgage when you're just starting a career or when you're rebuilding your finances.
An FHA loan is structured so that first-time buyers have an easier time buying a new home and keeping up with monthly payments. It's a mortgage option to consider, and the terms might work to your advantage so that you can get into a new home sooner and start building equity.
For more information, contact a professional like Andy Boyum - Minnesota Mortgage Guy today.Share