fha loans

FHA Loan Basics and Benefits

Michael Drew | FHA Loan

An FHA loan is basically meant to make things easy with a lender when somebody wants to be a homeowner or needs refinancing. In this sense, the Federal Housing Administration doesn’t actually offer loans, but simply insures them. A summary of the benefits of these loans would include lower down payments and closing costs, and a lower credit threshold.

This means the lender can offer better terms and many people who would otherwise not qualify on credit grounds are able to get a better deal. The interest rate charged by a lender for the same loan varies based on a person’s credit score. But if it is insured by the Federal Housing Administration, the lender will offer an interest rate that’s usually only available to people with much higher credit scores.

Nowadays lenders are making sure people pay huge down payments for mortgages in case the property value drops further. At such a time, an FHA loan offers prospective homeowners a low down payment.

The mortgage finance also includes most of the closing costs.

The net effect is that the homeowner gets a good rate on a mortgage without a big down payment or a high credit score.

For those who need to buy a house and do some repairs or remodeling, it’s possible to get all of it financed as a single mortgage. A new trend that many homeowners are opting for is to make energy-saving improvements, which can also be included in the mortgage.

The Federal Housing Administration will even support reverse mortgages where the homeowner wants cash in return for diluting equity. There are, of course, certain guidelines and restrictions that apply. For instance, there is a ceiling on property values that vary based on the location.

There are also fewer repair demands now than before. For instance, unless a roof is leaking it doesn’t have to be replaced, even if it is old.

The summary of it is that an FHA loan offers all the benefits it has had over the conventional mortgage, and now it is also much less restrictive.…