How FHA Loans Work
Some negative things have been said concerning FHA loans. Maybe some loan officers steered people toward using conventional loans instead. There are times that a conventional loan actually is better, but there are a few differences you should be aware of when making your decision.
Conventional mortgages might not require any mortgage insurance. It’s true that you can save some money if you avoid this,but because FHA loans have this insurance is what makes it possible to get a loan even if your credit is not so good. If this is your situation then maybe an FHA loan is worth looking into.
There was a time when utilizing an FHA loan was dependent on how much money you had for your downpayment. Conventional loans have notoriously required 10% to 20% down. If you haven’t saved that kind of money then there is another reason for considering an FHA loan. They only ask for 3.5% down. They allow a bit of creativity in their down payments. Like maybe a family member would want to make a gift of your down payment. That would work with this kind of a loan product.
Say you happen to be a young person and don’t have a big credit history. Conventional mortgages might disqualify you for that, but with FHA loans your credit history isn’t the all important factor. They let you use things like rent payments and bill payments for establishing your credit worthiness. This means you will not have to wait when trying to buy your first home.
Maybe you’ve had a foreclosure. With today’s economy a lot of people have gone through this. Again an FHA loan can get you money faster. It only takes three years to be eligible for an FHA loan again.
Maybe you had a few problems in the past. Maybe you declared bankruptcy, but now you want to purchase a home. With conventional mortgages they will ask you to wait a lot longer than an FHA loan would before getting a loan. You can qualify for an FHA loan within two years of filing for bankruptcy. If this describes you then an FHA loan is the way to go.
Some people don’t like the fact that their new home has to measure up to FHA inspections. It’s true that they are a bit stiffer in their requirements, but they ensure that your new home will be sound before insuring it. You can be sure that you won’t be spending hundreds or thousands on repairs.
It’s true that not everybody needs an FHA loan, but many do, and many come out good. There are some good benefits to be found with FHA loans and they have proven to be really good deals for a lot of first time home buyers.