The Federal Housing Administration (FHA) has been insuring home loans across the United States since 1934. The FHA doesn’t, however, make any loans. This insurance that the FHA provides helps to minimize the risk of loss for lenders that make these loans.
FHA loans are great for first-time homebuyers. They offer more flexibility and rate security for borrowers who have a smaller down payment, lower equity position, tighter monthly cash flow (debt to income), or less than perfect credit.
FHA Loan Criteria and Benefits
An FHA mortgage follows certain specific underlying criteria which are laid out by the FHA. These benefit borrowers in ways that conventional loans do not. Let’s take a closer look:
- Lower down payments. FHA insured loans require a smaller down payment on the part of the home buyer. Conventional mortgages often require substantially more money be put down as a down payment for the loan. Also, gift funds are permitted as part of the down payment.
- It’s easier to qualify. FHA mortgages allow for higher debt-to-income ratios which make it easier for one to qualify or a mortgage. This means that your car payment and other monthly expenses may not preclude you from getting FHA financing.
- Hassle-free closings. FHA mortgages permit sellers of real estate to concede up to 6.00% of the sales price toward closing costs. Of course, this is an enormous benefit to the buyer and the seller because it closes transactions which would never have occurred otherwise.
- Lower interest rates. FHA loans have lower interest rates. Anytime the borrower can secure a loan at a lower rate means thousands of dollars in savings over the life of the loan.
- You don’t need a perfect credit score. An FHA mortgage has a lower credit score requirement than regular conventional loans. This assists those borrowers who, through no fault of their own, might have items on their credit report that would preclude them from getting a home loan.
Other FHA home loan benefits:
- FHA insurance protecting lenders. Lenders therefore have more flexibility in getting you qualified.
- Options are available for borrowers with a negative credit event.
- Varying terms to fit the borrower’s timeline.
Peoples Bank is approved as a Full Eagle Lender by FHA and is authorized to process loan applications, underwrite, and close FHA loans. Wherever you’re located in the country, we can help you with your FHA mortgage. Please contact us or give us a call today at (843) 606-6058 for a free consultation and see if an FHA mortgage is right or you!