3 Questions that Will Help You in Deciding if FHA Is Right for You
FHA Loans ;As we all know that mortgage is the key to a successful home. There is nothing like a dream home but when you don’t have enough funds then it will become a nightmare. If you are among those who are looking for a home loan for their first or second property then you will have an option of the FHA loans.
First Time Homebuyers are eligible to take an FHA Loan
The government introduced a new regulation in 2015 that allowed FHA insured loans to be issued to people who are not first time homebuyers. As per the regulations of FHA, any one who has never bought a home can avail the benefit of FHA loans. FHA is known for providing low down payment loan and flexible repayment schemes.
FHA loans can be used for buying a home even if you have negative credit
The most interesting part of the FHA loan is that the borrower does not need to have a good credit score to get it. In fact, borrowers can have a FICO score of 500. If you have a credit score less than 620 then you can still take this loan. If you have a bad credit then this is the right option for you because you can avail the loan even if you have a negative credit history.
FHA is not suitable for everyone
There are many reasons why you should opt for the FHA loan. If you are a student, if you are an entrepreneur or if you have a bad credit history then the FHA is perfect for you. If you are in the position where you cannot afford to pay more for the loan then the FHA loan will suit your needs.
The 3 Different Types of FHA Loans Available for Home Buyers
In today’s modern era, where everyone wants to own a home of their own, there are certain criteria required to buy a house. These requirements include monthly income and the amount of money required for the down payment and closing cost. So, if you don’t have enough money and you don’t have any credit score, then you may not be able to purchase a house. However, this doesn’t mean that you will not be able to buy a home. In fact, there are two types of loans available which you can use to purchase a home.
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You can go for a conventional loan and if you don’t have any savings or money, then you can go for an FHA loan.
What is an FHA Loan?
It is one of the most common questions among home buyers. They wonder, how do the FHA loans work. So, what is the difference between the conventional and the FHA loans? And what type of loan would be better for you? Here, I will discuss these three different types of FHA loans and how they work for the home buyers.
Conventional Loans
Conventional loans are the most common loans available in the market. These are available for those who are eligible for the FHA. The main advantage of these loans is that the buyers don’t need to have a perfect credit score and they don’t require any collateral for this loan.
However, the main disadvantage of this loan is that it requires a down payment of almost 40%. So, if the down payment is less than 20%, then this loan will not be suitable for you.
FHA Loans
FHA loans are the second most common type of loan in the industry. They are available for both, first-time buyers and experienced buyers who want to invest in their dream home. You don’t need to provide any down payment for these loans and the amount of money is usually around 10 to 20% of the total property price.
The main advantage of these loans is that you don’t need a good credit score. Your credit score doesn’t matter and even if your credit score is bad, then you can still get these loans.
However, you can’t borrow more than 95% of your loan amount. Also, you will be asked to pay the closing cost of 5 to 10% of the total property price. So, if your total price is $200,000, then the maximum amount you can borrow is $19,000. So, you will have to pay $1000 to $1500 as closing cost.
Conclusion:
These are some of the questions that you must answer before taking an FHA loan. If you are interested in getting a loan, then it is better to approach the lender for a proper understanding.
