Think you can’t qualify to buy your ideal house? Don’t lose hope. The Federal Housing Administration (FHA) allows homebuyers to enjoy lower closing costs, relaxed lending standards, and a low down payment.
Here are some facts you need to know about FHA-guaranteed loans:
An FHA-insured loan require a low down payment
Traditional lenders typically require a 20 percent down payment. FHA home lenders offer FHA loans that require a 3.5 percent down payment. They also allow borrowers to obtain the cash for their down payment as a gift from family members or charity. Most traditional lenders do not allow that.
Traditional loans are harder to qualify for than FHA loans
Borrowers with less-than-perfect credit can qualify for an FHA-guaranteed loan. A lender who works with the FHA is going to give you a break because the government is standing behind your FHA-guaranteed loan. That gives a real opportunity to homebuyers who find obtaining a home loan a real challenge.
FHA-guaranteed loans have low interest rates
FHA loans in Minnesota, for instance, usually have low interest rates. The FHA does not determine the interest rates of the home loans it backs. The interest rate you pay for an FHA mortgage loan will be negotiated with your FHA home lender.
An FHA mortgage loan can help you make upgrades and repairs
If your home needs repairs, an FHA-insured loan or may be just what you need. You can purchase a house that needs a little TLC and get up to $25,000 on top of the purchase price for repairs and alterations, all wrapped up in one FHA home loan.
Not every FHA-guaranteed loan package will be the same. FHA lenders will determine the terms and interest rate to offer. As with any home loan application, it’s always a good idea to shop around and compare FHA loans with different lenders.