Why you should consider an FHA loan

There are some great reasons you should consider an FHA loan. The FHA is working hard to make sure home ownership is possible for more Americans. FHA loans don’t require perfect credit or high income.

Low Down Payments for FHA loan

There are programs available through the FHA that will allow you to put as little as 5% of the purchase price as a down payment. If you qualify for one of these programs that means for a $100,000 home you would need a $5000 down payment. However, if you put less than 20% down it is possible you will need to have a  mortgage insurance policy. This can increase your monthly house payments and needs to be considered when you are trying to decide if you can afford the homes you are looking at.

Low Closing Costs for FHA loan

Although you can’t roll closing costs into your FHA loan some lenders will allow closing costs to be a portion of the amount required for down payment.  Be sure to ask your lender if this would work for you.

An FHA loan is assumable

You can assume an FHA loan, this can save you money since the process is streamlined and is less expensive than securing a new loan. If you are selling your house, allowing the buyer to assume your loan can be a great advantage over other non FHA homes on the market.

What is an FHA loan

Now the FHA is agency within Housing and Urban Development. Originally it was established in 1934 with the ambitious goal of helping Americans participate in the American Dream of home ownership by providing mortgage insurance to lenders. The FHA guarantees that a lender will be paid back for the loan, making it possible for lenders to provide money to people who might not otherwise qualify for a home loan.

There are additional fees associated with an FHA loan

When you apply for an FHA loan you will have to pay a loan application fee. This fee will cover the cost involved with underwriting an FHA loan including the appraisal and the cost of ordering a credit report.

How much can I borrow for an FHA loan?

FHA guidelines state housing expenses should be no more than 29% of your total income. They also stipulate that housing expenses plus non housing expenses (car payments, credit card debt, student loans, child support, alimony, etc.) should not total more than 41% of your income.

In addition the FHA has limits on how much money they will lend. You should talk to your lender to find out what these limits are in your region of the country.

Frequently asked FHA loan questions.