you are looking for the right kind of mortgage product to help you get into a home, the three most common types
you hear about are conventional, VA, and FHA mortgages. While all three are popular mortgage products, let's
look more closely at the FHA mortgage. People who have been looking for a bad credit mortgage have often been able to go with an FHA
mortgage because the credit requirements are not as strict as with conventional loans. Many people who have
excellent credit have used FHA loans as well. You may wonder why so many borrowers opt for FHA
Both borrowers and
lenders like the fact that FHA loans are regulated and insured by the Federal Housing
Administration. This means that the lender has less risk if the
borrower cannot make all the payments because the federal insurance will cover the loss. For the borrower, the insurance by the FHA means that the down payment is
only 3.5% of the total value of the home they wish to purchase.
With a conventional loan, one is required to pay somewhere between 10% and 20% of the home's value as a down
payment. With the ability to go with a smaller down payment, the
house becomes much more affordable.
Because of the current
economy, many people struggle to keep enough money in savings to meet the high down payment requirements for
conventional loans, an FHA mortgage is a definite plus. Even if you
need a bad credit mortgage, your down payment is low and your interest rate will be competitive.
There are specific
guidelines to qualify for an FHA loan. As mentioned, the credit
requirements are somewhat less stringent than those of other loan products. If you are thinking of mortgage refinancing and currently have an HFA loan, your current
lender may be able to streamline your mortgage refinance. This
means little in the way of documentation because they already have your information and are simply refinancing
your current mortgage with a new rate.
For many people, the
lower credit score requirements, the lower down payments that are required, and the standardized specifications
make it easy to know what you need to do to get this type of a loan. With interest rates staying quite low, the rates for these loans are quite
competitive and you can get terms of 15, 20, and even 30 years.
If you can meet the
basic qualifications of income, employment and down payment, you may want to think about getting an FHA mortgage
loan while the rates are still low.