An FHA home purchase loan is a federally insured mortgage, issued by a lender that was approved by the Federal Housing Administration. These loans assist people with a low to moderate income, so they can acquire home loans with smaller deposits, often despite their credit score.
These mortgages have many benefits that make them popular, especially for people just entering the housing market. The program makes it possible for people to purchase homes who wouldn’t otherwise be able to. So, if you’re interested in buying a house but need some funding assistance, here’s why you should consider an FHA home purchase loan.
Low Credit? No Problem
You can apply for an FHA loan and likely still get approval with a credit score of 500. Although, if your credit score is between 500 and 579, you’ll have to make a 10% deposit to purchase your home. If it’s 580 and above, you may only need to make a 3.5% deposit. Other lenders typically start with a 5% deposit, making the FHA home purchase loan one of the best options for buying a home with a low deposit.
The Debt to Income Ratio
It’s possible to access a mortgage with the FHA even if your debt to income ratio is as high as 43%. The reason for this is that the government usually insures the loan, shielding the actual lender from incurring any losses that may arise if the borrower defaults. This is good news for aspiring homeowners, especially when compared to other conventional lenders.
Low Closing Costs
An FHA home purchase loan has lower closing costs than other lenders as well. Their closing costs can be as low as 3%, but it may also depend on the state since different states have varying rates of taxation.
FHA loans can transfer from the original buyer to the second buyer. Although, the second buyer still has to pass the FHA’s requirements before assuming responsibility for the loan. If the home has higher mortgage rates than the rate set during the initial purchase, it means that you would make a profit when you sold the property.
More Info on an FHA Home Purchase Loan
An FHA home loan is excellent for first-time buyers, or for people with a low credit score who are considering a new house. If you have questions or would like to apply for a mortgage, contact Karen Douglas at The Mortgage Genie by calling 925 648 0981, or fill out the contact form by clicking here.