In our previous blogs we’ve talked about the advantages of VA loans and how they can help those who have served our country in the United States Armed Forces. We’ve also discussed how USDA loans help those who are interested in moving to smaller towns or out to the country. But there’s another loan out there for those who have special loan circumstance and want to live in the city, even if they haven’t been in the military. Those are FHA loans, and that’s what we’re going to discuss today.

What is An FHA-Insured Loan?

An FHA-insured loan is one that is offered to people who might not qualify for traditional loans. Either they have a smaller down payment, have a credit history problem, or have debt ratios that have prevented them from getting a home loan in the past.

Is it A Loan From The US Government?

No, an FHA loan does not come directly from the government. It is insured by the government, but those interested in buying a house approach a mortgage lender (such as a bank) directly. The mortgage lender sells the loan, which is backed by the US government’s insurance program.

Who Qualifies?

Qualifications can change when it comes to FHA loan requirements, but many people can qualify for an FHA-insured loan. Lower scores are tolerated with FHA-insured loans, with 560 being the minimum to get you started. However, the lower your FICO score, the higher mortgage rates you’re likely to encounter.

What Are The Advantages?

The FHA-loan program was started in order to help people attain homeownership, so there have been some enticements built in. As we just mentioned, those with lower credit scores are eligible. Also, down payment requirements are less for FHA mortgages than they are for traditional home loans. Typically, you can put as little as 3.5% down with one of these loans. There are also options for lower mortgage insurance premiums. And speaking of which…

What’s The Disadvantage?

If there’s a disadvantage, it’s mortgage insurance. Mortgage insurance is something that’s required where less than 20% of the loan is put down as a down payment ($20,000 on a $100,000 home, for instance). Because most people obtaining an FHA mortgage are putting down less than 20%, mortgage insurance is required to protect the lender against default. However, there are ways to lessen mortgage insurance, so be sure to talk to us.

What If You’ve Had Previous Loan Problems?

One advantage of an FHA mortgage is that it’s more forgiving of those who have had loan problems before. Those with previous foreclosures or bankruptcies should still contact a mortgage lender, because there’s a very good chance that we can find them an FHA loan that’s right for them. Not only can we help them get their credit back on track, but we can help them get a home!

FHA loans have been around for more than 80 years, helping those who have trouble getting a traditional loan obtain a mortgage. The Frederick Branch of Goldwater Bank is there to help you, so contact us about an FHA mortgage today!