You’re in the market to buy a home and you keep hearing about an FHA Loan as a smart financing option. But what exactly is an FHA Loan, and how do you know if you qualify?
The FHA loan process may be a great alternative for many property seekers because it offers moderate rates for buyers with lower credit scores. FHA loans were created in response to a housing market recession in the 1930s and is now used to help provide mortgage buyers with an affordable alternative for loan, while providing adequate insurance.
In short, an FHA loan is a loan from the Federal Housing Administration and is government backed. FHA Loans permit first-time home buyers or other buyers with lower credit scores to secure mortgages for reasonable homes.
Basic qualifications for an FHA Loan involve the following:
- A valid Social Security number
- Steady employment for at least two years
- A minimum credit score of 580
- A down payment of as little as 3.5%
Sometimes, a first time home buyer can qualify with an even lower credit score, but might need a higher down payment of up to 10% of the purchase price.
In addition, the mortgage buyer might have to purchase PMI (Private Mortgage insurance - premiums to help protect the lender of the loan, and the property will need to be appraised by an FHA-approved appraiser.
Although the buyers must meet the standards to qualify, they are not total blockades stopping people from buying homes. In fact, the FHA loan program was created to help buyers enter the housing market.
If you are looking for additional help in the process of buying a home, or have other questions concerning buying property using an FHA Loan, or need advice on a real estate transaction, NextHome Titletown can help you! Please reach out and say hello at 617.657.9811 or firstname.lastname@example.org.