FHA loans make comeback
When you decide it is finally time to buy a home, you will find that there are many different types of mortgages to choose from to finance your purchase.
Depending on your income, and the type of home you want, you may be able to qualify for an unconventional loan or an assistive loan.
One of these types of loans is the Federal Housing Administration Loan, or FHA loan, which is gaining its popularity back.
An article by Elizabeth Weintraub of about.com, “FHA loans bounce back in favor,” discusses how this type of loan is making a come back in the mortgage world.
“FHA mortgages are becoming popular again! It's an institution that has been around for a long time, since June 27, 1934. The Department of Housing & Urban Development folded the Federal Housing Administration (FHA) under its umbrella in 1965.”
“FHA loans began to lose favor in the late 1990s, when home values began to inch upwards, surpassing FHA mortgage limits, and sellers balked at FHA's stringent appraisal guidelines.”
But now, times have changed and many are beginning to look at these loans with a new view.
FHA loans are good for many people because they give them the opportunity to buy homes that they may not normally be able to buy with a conventional mortgage loan.
They are especially helpful for people who do not put the traditional 20 percent down on their home.
“Now, FHA does not make loans or guarantee loans. It insures loans. The insurance removes or minimizes the default risk lenders face when buyers put down less than 20 percent.”
Mortgages are all dependent upon income, credit score and overall financial situation. If any of these things are not up to par, you could be denied. That is where FHA loans come in.
“If your credit is less than perfect, FHA might be the loan for you. You may qualify for an FHA loan even though you have had financial problems. FICO scores do not apply. You can obtain an FHA loan two years from the date of your bankruptcy discharge, as long as you've maintained good credit since your debts were discharged. If you keep your credit in excellent shape since a foreclosure, an FHA loan will be available to you three years from the final date of your foreclosure.”
The FHA loans not only help people out who are not in the best financial situation, but they offer competitive rates and payments as well.
“There is little or no adjustment to the interest rate for an FHA loan, as the rates vary within .125 percent of a conventional loan. Mortgage insurance is funded into the loan, meaning a premium of 1.5% is added to the loan balance instead of being paid out-of-pocket. In addition, a small portion for the mortgage insurance premium is added to the monthly payment, but it is far less than private mortgage insurance premiums.”
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