FHA Home Loans

FHA Home Loans – Federal Housing Administration

The Federal Housing Administration home loans were once an easy in for homebuyers without the ability to make a large down payment, but as prices have gone up on FHA mortgages, they’ve lost some of their appeal. Though FHA loans are easier to qualify for than conventional mortgages, they come with a high price tag, including the need to pay mortgage insurance for the life of the loan, a fee that definitely adds up. Still, while an FHA mortgage might not be your first option, it can be one way to get into a home if you don’t have enough saved for a down payment or your credit history isn’t as good as it could be. When you’re weighing your mortgage options, you should take a look at FHA mortgages to decide if they may be a good fit for your financial situation.

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The Cost and Savings of an FHA Home Loan

In addition to a down payment and closing costs, FHA loans require borrowers to pay an up-front fee for mortgage insurance (UFMIP), as well as pay an annual fee for mortgage insurance (PMI). Expect to pay at least 3.5% of the purchase price as a down payment and an additional 1.75% added into the loan towards your UFMIP, while the annual fee varies depending on the length of the loan, the amount borrowed and the loan-to-value ratio. When you’re looking at these costs, be sure to do the math: other types of loans, even those that require mortgage insurance, may cost you less than paying the combination of UFMIP and PMI as required by the FHA. You’ll want to investigate the various loan types and different lenders to see which type of mortgage makes the most sense for your financial situation.

Private Mortgage Insurance (PMI)

Mortgage insurance or Private Mortgage Insurance (PMI) is an additional cost added to your mortgage payments on a monthly or annual basis to cover the lender in the event you default. If you can’t repay your loan, mortgage insurance makes sure your lender gets paid — which means the lender is more likely to make a loan that could be a high risk. While mortgage insurance is typically only required for loans with a down payment under 20%, they’re required for the lifetime of all FHA loans.

Qualifying for an FHA Home Loan

The biggest advantage of FHA loans is that they’re easy to qualify for, even if you don’t have the cash for a big down payment or your debt-to-income ratio (DTI) is higher than your lender might prefer. Though you’ll still want a decent credit history to get an FHA loan, a perfect credit report is not required.

Why an FHA Home Loan

Though the fees on FHA loans may be slightly higher for borrowers, the help it provides for qualifying for a loan makes FHA home loans a great option. If you’re having trouble qualifying for a conventional mortgage, you may be able to qualify for an FHA loan. For individuals with less than sparkling credit or a high DTI, FHA loans may be the best way to get into a home.

The FHA Loan Process

The process to get an FHA loan is very much like the process to get a conventional mortgage. Let us know you are interested in an FHA loan and we will help you qualify for the best loan. Though these loans are backed by the FHA, the rates and requirements will vary from lender to lender, so we will shop for the best terms for your loan.