While you may be more familiar with other types of home loans, FHA loans have been helping people become homeowners since 1934. The Federal Housing Administration (FHA) - which is part of HUD - insures the loan, so your lender can offer you a better deal.
Although FHA Loans are also guaranteed by the government this type of loan is issued by the Federal Housing Administration and is available to all borrowers.
One very unique characteristic about FHA Loans is that even though they are issued by traditional lenders they are insured by the government against default. For this reason lending requirements are less strict and down payment required can be as low as 3.5%. However, one important limitation about FHA Loans is that the market’s lowest interest rates are not available under this program.
Another great advantage of FHA Loans is that even when private mortgage insurance is required the coverage terms are more flexible than those used on conventional loans, fees are rolled into the loan and the seller can contribute with up to 6% of total closing cost.
Even though FHA loans may allow a higher debt to income ratio the final number loaned will depend of the institution you are working with. Finally, FHA Loans have a limit on the maximum loan amount allowed and may vary depending on if the property is a single home or a multi-unit (up to 4 units) property.
Always consult a trusted advisor before making a decision about this financing option is right for you. If you believe you qualify for a more conventional loan, you can click here to learn about the new construction-to-mortgage options offered by most lending institutions.
Learn more and talk to someone about FHA loans today about financing your new home.