A Federal Housing Administration (FHA) is a mortgage insurance- backed mortgage loan, which offers various frills to qualifying candidates. In this case, the FHA is not a lender, but an insurer. The FHA covers the seller by insuring the amount lent, in case the borrower defaults. The program was introduced during the Great Depression to encourage lenders to continue lending money to borrowers.
Top 4 Important Facts about FHA Loans
Following are the top facts to be considered before applying for an FHA loan:
FHA loans are easier to qualify for.
This is one of the biggest advantages of an FHA loan. People who have a credit score as low as 640 may be eligible to qualify for the loan. There are less restrictions on the credit score, and you can plan to correct your credit score to qualify for an FHA loan.
FHA loans have lower interest rates.
Since the FHA offers protection to the lenders, they offer attractive interest rates to attract more consumers. In addition, buyers enjoy flexibility in their loan options.
The FHA can help you make home repairs and upgrades.
The FHA loan covers a wide range of rehabilitation projects including renovations. In fact, the FHA loan programs cover various renovation costs. The best part is that the loan amount depends on the value of the house after it has been upgraded.
FHA loans have lower closing costs.
Typically, FHA loans have much lower closing costs, which may reduce your financial burden. The program also allows any other person apart from the buyer (borrower) to cover the closing costs.
Hiring services of an FHA approved lender will help you to speed up the documentation procedure and understand the loan procedure. We at Drew Mortgage Associates help you to assess your loan requirements and shop for the right loan that justifies those requirements. If an FHA loan program doesn’t suit you, don’t worry, other options may be available.