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FHA Loans

Updated: Sep 19, 2023

Is a FHA Loan really the best loan for you?

 


When it comes to home financing, one of the options available is an FHA loan. An FHA loan is a loan from the Federal Housing Administration, and is insured by the government. The main benefit of an FHA loan is that it allows borrowers with less than stellar credit or limited saved funds for a down payment to purchase a home.



The idea behind an FHA loan is to enable more Americans access to home ownership. The government provides insurance to private lenders so that they can offer FHA loans without taking too much risk in case of borrower default. The FHA loan also allows borrowers with lower credit scores to become eligible.


Are you Ready to Apply?


When a borrower applies for an FHA loan, they are met with certain requirements. These requirements vary depending on certain factors such as the type of loan, the income and credit histories of the borrowers, among other things. The borrowers are usually subjected to a debtor-creditor ratio, which is the amount of debt compared to their income. Borrowers may have to produce documentation about their income and financial assets, employment history, and various types of bank statements.

What is Mortgage Insurance?

In addition to these requirements, the borrower may also have to pay upfront and annual mortgage insurance premiums, which are paid to the FHA so that they can assume the risk of defaulting. The up-front mortgage insurance premium is 1.75 percent of the purchase price of the loan, while the annual mortgage insurance premium is based on the loan's term and amount borrowed.


Where is the Advantage?


FHA loans have lower interest rates than other types of loans, and can be easier for individuals who don't have enough saved for a large down payment. While this type of loan is beneficial for those with lower credit scores or limited funds, it's important to thoroughly research other options before deciding if an FHA loan is the right choice for you.

Keep in mind the FHA Loans are great loans. They are very lenient on credit underwriting, offer low down payments, fixed mortgage insurance rate and lower interest rates than non government backed loans...... BUT YOU NEED TO BE CAREFUL.


Why are Mortgage Brokers Better?


Most Banks and National Lenders charge a higher premium on FHA loans which result in higher cost to the buyers. When shopping for a mortgage be sure to check out the local Mortgage Brokers like New Point Lending. With a direct line to Wholesale pricing they can offer deals the bigger Banks and Lenders struggle to provide.


Call a Mortgage Broker today!

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