A Ray of Hope

Most people nurture a secret dream of buying a place, which they can call their “own home”. However, mortgage loans although easily and widely available come with their limitations, terms and conditions. Therefore, there are still many people who give up their dreams due to many obstacles. Some fail to have an attractive credit score to be eligible for a loan and others don’t have the resources to make a twenty to twenty five percent down payment.

For these people who see their dreams melting under the scorching heat of adverse circumstances can now rejoice; thanks to cool breeze named, FHA home loans.

More about FHA home loans

FHA home loans are mortgages insured by the Federal Housing Administration. Borrowers of these loans pay mortgage insurance. As FHA approved lenders are secured, they offer home loans at attractive interest rates, low down payment and not-so-stringent rules. This opens the door for borrowers with different limitations to borrow and convert their dream into reality.

Now that you have found your route to the much-aspired destination, here are some facts about FHA home loans. Delving into these will keep your hands full of information.

  • Down payment for most mortgage loans is almost twenty to twenty-five percent. However, FHA loans demand a down payment as low as 3.5 percent of the purchase price. However, if the borrowers’ credit score lies in the range of 500-579, the down payment rate climbs up the ladder to about ten percent.
  • The loan can be borrowed even if the down payment is given as a gift to the borrower by an acceptable donor.
  • As the FHA only insures loans and does not lend directly, it fails to lay down any strict guidelines on borrowing loans. The banks and other lenders lay down their own rules and guidelines, better known as lender overlays.
  • Paying the complete closing costs mostly adds to the expenses associated with the loan. When lenders pay these closing costs, they charge a high interest rate on the same, thus, enhancing the loan costs significantly. Conversely, the FHA allows lenders, sellers and builders to pay a part or whole of the closing costs, thus, reducing the burden of the loan and interest on the borrower. However, it is advisable to compare the regulations and price of both banks and FHA approved lenders and then choose.
  • The FHA offers a variety of loans including loans for first time home buyers, senior citizens, refinancing, including cash out refinances.
  • An FHA loan, unlike most others is assumable. If a seller wants to sell his mortgaged home, the buyer can assume the loan and purchase the house. This is especially beneficial for bankrupt people whose property is on the verge of foreclosure or so.
  • Two mortgage premiums are required to be paid for FHA home loans. The first mortgage insurance is 1.75 percent of the loan amount, which the lender can even add to the loan amount. The second insurance is known as an annual payment, although it is paid on a monthly basis. This amount varies in accordance with the length of the loan, loan-to-value ratio and the loan itself.

Now that you know about FHA home loans, find a FHA approved lender to give wings to your otherwise nascent dreams.