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Advantages of Fha Loans
Author David Schneider | Jan 07,2008
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The Federal Housing Administration, or FHA, exists to help you buy a home. It was established in 1934 and is now part of the Housing and Urban Development Office (HUD). The FHA does not give you a loan. Instead, it insures the loan that you receive. This insurance allows you to secure a loan from a lender that you may not have been able to qualify for on your own.Advantage of FHA Loans: Lower Down PaymentsWith conventional mortgages, you are required to make a twenty percent down payment. This requirement is not always required, as evidenced by the foreclosure problems around the country. However, as lending restrictions tighten again, the 20 percent rule may not be as easy to get around. Having the funds to make a sizeable down payment is difficult for many people. Their incomes may be enough to afford the monthly mortgage payments, but they lack the savings to pay the down payment. Twenty percent on a $200,000 home is $20,000. FHA loans make it much easier to buy a home because the down payment requirement is only three percent. On that same $200,000 home, you'd only have to pay $6,000 as a down payment. That is still a lot of money, but a much more realistic a figure to save up for. Advantages of FHA Loans: Gift PaymentsIf you don't have three percent saved up and also don't have money to cover closing costs, you can still get an FHA loan. This is because the money doesn't have to come from your own income and savings as with conventional mortgages. If friends, family or charitable organizations want to help you with the down payment and the closing costs, the FHA will accept their money as if it were your own. Advantage of FHA Loans: Poor Credit is AcceptablePeople with poor credit, are sometimes unable to obtain loans. This is especially true if the poor credit is due in part to a major financial event such as bankruptcy. With an FHA loan, however, poor credit is acceptable. In most cases, even a previous bankruptcy won't prevent you from qualifying.Advantage of FHA Loans: Programs to Help You Avoid ForeclosureSometimes events happen that make it difficult to make the mortgage payments. Things like a lost job or an injury can happen to us all, regardless of income or credit score. The FHA realizes this and has programs in place to help you avoid foreclosure should something unfortunate happen.
The Federal Housing Administration, or FHA, exists to help you buy a home. It was established in 1934 and is now part of the Housing and Urban Development Office (HUD). The FHA does not give you a loan. Instead, it insures the loan that you receive. This insurance allows you to secure a loan from a lender that you may not have been able to qualify for on your own.Advantage of FHA Loans: Lower Down PaymentsWith conventional mortgages, you are required to make a twenty percent down payment. This requirement is not always required, as evidenced by the foreclosure problems around the country. However, as lending restrictions tighten again, the 20 percent rule may not be as easy to get around. Having the funds to make a sizeable down payment is difficult for many people. Their incomes may be enough to afford the monthly mortgage payments, but they lack the savings to pay the down payment. Twenty percent on a $200,000 home is $20,000. FHA loans make it much easier to buy a home because the down payment requirement is only three percent. On that same $200,000 home, you'd only have to pay $6,000 as a down payment. That is still a lot of money, but a much more realistic a figure to save up for. Advantages of FHA Loans: Gift PaymentsIf you don't have three percent saved up and also don't have money to cover closing costs, you can still get an FHA loan. This is because the money doesn't have to come from your own income and savings as with conventional mortgages. If friends, family or charitable organizations want to help you with the down payment and the closing costs, the FHA will accept their money as if it were your own. Advantage of FHA Loans: Poor Credit is AcceptablePeople with poor credit, are sometimes unable to obtain loans. This is especially true if the poor credit is due in part to a major financial event such as bankruptcy. With an FHA loan, however, poor credit is acceptable. In most cases, even a previous bankruptcy won't prevent you from qualifying.Advantage of FHA Loans: Programs to Help You Avoid ForeclosureSometimes events happen that make it difficult to make the mortgage payments. Things like a lost job or an injury can happen to us all, regardless of income or credit score. The FHA realizes this and has programs in place to help you avoid foreclosure should something unfortunate happen. |
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