FHA Home Loan Programs
Home financing is the first thing that comes to a home buyer’s mind while looking for a home. Federal Housing Authority backed home loan programs have made home buying easier for many people, thanks to the less stringent qualifying guidelines. FHA home loans are popular with borrowers because it requires really low down payments and the risks involved are lower for the lenders as well.
FHA loans have existed since 1934 and are the best suited loan programs for first time buyers as well as repeat buyers. We can help you know more about FHA loans and can also help you qualify for one.
Types of FHA Home Loans
FHA offers variety of home loan programs which are offered through FHA approved lenders. If you are willing to acquire a mortgage through FHA, you will have to pay mortgage insurance for the first 5 years and once you have sufficient home equity, you no longer have to pay the mortgage insurance. This means the monthly payments get reduced considerably.
You can choose from the following home loan programs offered by FHA:
- Conventional Fixed Rate Mortgages: This type of FHA home loan has specific loan tenure and has a fixed interest rate throughout the loan tenure. This means there will be no fluctuations in the monthly loan payments apart from the property taxes and insurance. These home loans are not assumable and have prepayment penalties.
- Conventional Adjustable Rate Mortgages:c This type home loan also has specific loan tenure but the interest rates vary throughout the loan period. Ideally the interest rates remain fixed for the first 3-5 years and then start varying.
- Relocation Mortgages: FHA offers financing for those willing to relocate to a new house while they put up their existing house for sale.
- Bridge Mortgages: These are similar to relocation mortgages the only difference being, that you can buy a new home before putting up your existing house on sale.
Properties Eligible for FHA Home Loans
The property to be financed through FHA should be used as the primary residence and must be owner-occupied. You will not be allowed to buy rental or investment properties. Almost all types of properties are eligible under FHA home loan programs. Townhouses, detached and semi-detached houses, row houses and condos within a specific FHA-approved condo project will be eligible to get financing from Federal Housing Authority.
Facts about FHA Home Loans
It is essential that you choose the right home loan program according to your budget and monthly income, so that you don’t have any problem repaying the loan. To be able to make an informed decision, you need to know a home loan inside out. Here are some important facts about FHA loans that every borrower should know:
- People having a credit score of 580 or above are required to pay a down payment of 3.5%. But people whose credit scores range between 500 and 579 are required to pay a down payment of 10%. Credit scores below 500 will not be considered under normal circumstances.
- Borrowers can use their own savings to pay the down payments, but if they don’t have enough cash they can use gift funds from family members, friends or anyone who does not benefit from the deal. Even government down-payment assistance program are allowed.
- FHA allows sellers, lenders or builders to contribute towards the closing costs. Remember, if the lender agrees to pay the closing costs, he may charge higher interest rates. So make sure you compare the costs and then decide.
- FHA loans are offered through FHA approved lenders so the interest rates and costs may vary with individual lenders. Make sure you shop around to get the best rates.
- Two types of mortgage insurance premiums are required – an upfront premium and an annual premium, which is broken down into monthly payments.
Now that you are well aware about FHA home loans it will be easier for you to make a better choice. For further assistance, talk to our loan specialists. You can call us or send us an email.