FHA Home Loans – Down Payment Basics

FHA Home Loans - Down Payment Basics

FHA Home Loans – Down Payment Basics

The loans provided by the Federal Housing Administration (FHA) are undoubtedly the most popular type of mortgage that requires very low down payment and offers an array of benefits. Most people belonging to the low to moderate income group and with credit challenges rely on government home financing programs to buy a home for the first time.

FHA home loan is such a home financing program that has helped millions of families move into a home of their own. So if home buying is on the top of your priority list, consider applying for FHA home loans with FHA Loans Direct.

Down Payment Basics for FHA Home Loans

Apart from the zero down payment loans, FHA is the most affordable and convenient home financing option for the home buyers. It requires a low down payment and offer amazingly low interest rates, which makes home buying much easier.FHA Home Loans - Down Payment Basics

So what is a down payment?

Down payment is the amount of money that the buyer pays in cash for buying a property. This amount is not included within the mortgage. By paying a down payment, you lower the amount of mortgage required to buy the property. Like other costs, the down payment cannot be financed within the mortgage and it is expressed in percentages such as 5 percent down payment or 10 percent down payment.

Depending upon the type of loan you take, you will have to pay appropriate down payment. For FHA loans, the required down payment is 3.5 percent of the total purchase price of the property. The more the amount of the down payment you pay, the better it is for the lender and you will be considered as a safe prospect.

FHA Home Loans – Down Payment Requirements

FHA Home Loans - Down Payment BasicsThe down payment requirement for FHA loans is must more affordable than conventional loans. Down payment for conventional loans vary from lender to lender, while for FHA home loans the minimum required down payment is fixed at 3.5 percent.

But remember one thing, to take advantage of the 3.5 percent down payment; you must have a credit score of 580 or above. In case your credit scores are less than 580 you will have to pay 10 percent down payment. Credit scores under 500 will not be considered eligible for the FHA loan program.

There is good news for people who are considering using FHA home loans to buy their properties. You can use gift funds to pay the down payment, thus lowering your overall out-of-the-pocket expenses. This gift funds can be received from family members or close friends. You should be able to prove the credibility of the source and the person offering you the gift should give in writing that under no circumstances will he/ she expect the borrower to return the gift money. FHA is very strict about verifying the source of such gift funds, so make sure you adhere to the rules and guidelines. You can also receive gift funds from down payment assistance programs or certain NGOs. This plan is specifically very helpful for the first time home buyers, since they don’t have enough cash reserves or credit history.

So now you can become a proud home owner even if you don’t have huge cash reserves or stellar credit scores. You can get approved for FHA home loans if you have a stable source of income and you show the willingness to repay the loan within time.

FHA offers a number of benefits compared to traditional home loan programs, so in order to bag these benefits, apply your FHA home loan today! Call us to know more about the process.

FHA Home Loans - Down Payment Basics