FHA loans - The Easy Road to Financing Your First Home

HOUSTON - Dec. 12, 2016 - PRLog -- Being a first-time borrower for a new home is no easy feat. While there are so many people who would like to get their first house financed, very few people can do that due to one reason or another. However, it is also not favorable to let their dreams go to waste. It is for this reason that the Department of Housing and Urban Development (HUD) introduced FHA loans. With the help of this kind of mortgage, people with limited credit would now have a chance of getting their loan approved. Not only that, but they would finally be able to make their dream a reality.

What are FHA loans?

To determine whether these kinds of loans would be applicable for certain types of people or a particular situation or not, it would make complete sense to know what the big deal is with these kinds of loans. A mortgage loan which has been issued by the Federal Housing Administration (FHA), it allows the borrowers to come up with a minimal down payment requirement of 3.5% of the purchase price. Not only that, but this is something which they would be able to get done at very low interest rates and flexible terms. As a result, the borrowers would not have to deal with the stress of coming up with a substantial down payment and still have an affordable monthly house payment.

The reason why FHA home loans have become so popular, particularly with people who are planning to buy a home for the first time, is because of the wide array of benefits and facilities that they seem to provide. Besides, the restrictions also appear to be less strict than the conventional loans in this case. With a down payment of as little as 3.5 percent, the borrowers would be able to get themselves signed up for this loan. As for the credit score, that just needs to be 580 or higher. Another thing that is important to keep in mind is that the lower the credit rating score is, the higher the interest rate the borrowers would be receiving. So, even though people suffering from a not so good credit history would be able to get a chance and meet the FHA loan requirements, that does not mean in any way that efforts and initiatives should not be taken in improving the credit score.

FHA loans come with some advantages that the borrowers would be able to enjoy. Some of these include:

Easy qualification process - In the case of applying for or even qualifying for conventional loans, many people seem to fall behind as a result of their poor credit scores or something equally vital. However, that would not be the case with FHA loans. Thanks to the lower requirements imposed, it has become easier than ever before to get qualified for this loan.

Highly competitive interest rates - With marginal credit borrowers, there never really is any certainty regarding the consistency of mortgage rates. However, that is not something that a borrower would need to worry about regarding FHA mortgage loans. With very low and competitive interest rates, first-time borrowers would be able to get their loan approved in a short span of time.

Lower fees - Lower fees could also be enjoyed regarding mortgage insurance premium, closing costs, and others. FHA limits the fees that a lender can charge a borrower. There are certain allowable fees and non-allowable fees.

Foreclosure/Bankruptcy waiting period - A lot of people worry they would not be able to fall under and meet the FHA loan requirements because they have a prior bankruptcy or foreclosure. However, that is not true. This would, in no way, exclude any borrower from getting an FHA loan. They simply have to meet the waiting period requirement and show a re-established credit since the foreclosure or bankruptcy.

Lenient credit requirement - For qualifying applicants, two lines of credit are usually required by the FHA. However, if a borrower doesn't have some credit history or rating, they can use a non-traditional or an alternate trade line, like a phone bill, utility bill, etc., which can show a year's worth of payment history to qualify for an FHA home loan.

In other words, FHA loans provided by Department of Housing and Urban Development could help in making the difference between dreams and reality. So rather than turning it into a financial nightmare, the borrowers would be getting the opportunity of turning it into a good reality.

FHA loan requirements

Under the guidelines which have been specified by FHA, some of the conditions for applying for a loan are as follows:

• The borrower must be a citizen or a lawful resident, have a genuine Social Security number, and of legal age to sign or get in a contract;
• The borrower must be able to show stability and a 2-year verifiable employment history;
• Must live in the house and use it as their primary residence;
• The borrower must have a property appraisal from an FHA approved appraiser;
• The borrower's front-end and back-end ratio must meet the minimum requirements;
• Come up with a down payment of at least 3.5 percent;
• The property must meet the minimum standard set forth by HUD;
• If buying a condo, the condo project must be an FHA approved condominium.

About TexasFHA.org: A subsidiary of AMCAP Mortgage, Ltd., Texasfha.org is a registered mortgage banking entity with the Texas board, and they conduct business in 24 States. Designated as a "Full Eagle" FHA lender, they originate, process, underwrite, close and fund their loans under one roof. As one of the best mortgage lenders in the country, the AMCAP Mortgage - North Houston Branch provides guidance and advice to prospective home buyers. Details about FHA guidelines can be found on their website at http://texasfha.org/.