First Time Home Buyer
FHA loans are one of a variety of government mortgage programs created to promote home ownership. Administered by the Federal Housing Administration (FHA), an FHA home loan is one that is insured by FHA against the borrower’s potential default (i.e., not paying back the mortgage loan).
This unique guarantee from the Federal government to mortgage lenders, allows first time home buyers and current homeowners refinancing to more often qualify for the homes they want to buy.
Who Can Get an FHA Home Loan?
You! I can almost guarantee it. The FHA mortgage loan program is one that encourages home ownership. Therefore, the qualifications to get an FHA loan are minimal.
Here are some of ways FHA loans are easier to get:
- Smaller down payments (3.5 percent, in some cases lower)
- Generous mortgage loan amounts ($297,500 in the Detroit-metro area)
- Much easier credit qualifications
- Reasonable debt-to-income ratios
Simply making it easier to qualify for a mortgage isn’t an FHA loan’s only advantage. FHA loans can also give you more flexibility during the financing and as a borrower.
FHA Home Loan Advantages
The US government believes that homeownership makes for better citizens and communities. The FHA, with their variety of home loan programs, helps encourage that belief into a reality.
In addition to being easier to qualify for, FHA loans have some other advantages. For example, FHA offers these unique mortgage advantages:
- Easier to use gifts for a down payment and closing costs
- No prepayment penalty (allowing you to refinance into a lower mortgage rate)
- FHA loans are assumable (making selling a home easier)
- Typically there is more leniency if you run into future financial hardship
- Funding for home improvements or fixer-upper homes (through FHA 203k)
FHA Home Loan Disadvantages
Of course, like any mortgage financing, a particular loan program may not fit your specific personal financial situation. Here are some of the potential drawbacks of an FHA home loan:
- You may need a larger loan amount for the home you want to buy
- You need to have established some credit (Although, this is really true for most mortgages)
- You will need mortgage insurance (Again, this is probably true for most mortgages in this market)
- Mortgage loans are more standard (i.e., 30-year fixed-rate), not interest-only or ARMs
As you can see the disadvantages to an FHA loan are more about needing another mortgage option, not necessarily disqualifying you from buying a home.
How Do I Get a FHA Mortgage Loan?
Finding an FHA mortgage loans is really the simple part. Just give me a call at 248-724-2200.
We’ll walk through your personal mortgage needs.
About David Hall