Advantages of a FHA Loan
A FHA loan or Federal Housing Administration Loan was the original residential loan product. The FHA was created in June 27, 1934 and has since then has helped many families achieve their dream of owning a home. This loan started to lose favor in the late 1990′s when values of home began to inch upward, but it has rebounded nowadays.
Today, FHA does not guarantee or make loans but it insures loans. The insurance minimizes or removes the default risk that lenders face when homebuyers give less than twenty percent in deposit. If you have a less than perfect credit report, this loan might be good for you since this allows loan to people who have financial problems. Following are some of the advantages of FHA loans:
1. People with bad credit can still avail of this loan easily than a conventional home loan.
2. It requires lesser down payment and low rates of interest. For those who do not have a good credit rating, they will be required to pay a higher down payment in most home loans, but a FHA does not make this demand.
3. The processing time is faster due to the insurance provided by the Federal Housing Administration.
4. Lenders are more confident and secure in granting this loan because of the insurance.
5. The down payment will be as low as 3 to 5 percent for this kind of loan.
6. An FHA loan can be obtained within two to three years after the date of your bankruptcy discharge so long as you were able to maintain a good credit since your were discharged from your debts.
7. As long as you keep your credit in good shape after a foreclosure, an FHA loan will be available for you two to three years from the final date of the foreclosure.
8. There will be lesser or no adjustment rate of interest in this loan as the rates are within.125 percent to that of a conventional loan.
9. Mortgage insurance is added into the loan, this means a premium of 1.5 percent added to the loan balance instead of paid out of your pockets. A small portion of the mortgage insurance premium is also added to your monthly payment, but it is far lesser than private mortgage premiums.
10. Since the FHA has been around since 1934, it will continue to protect you and your home. In the event that encounter difficult times after purchasing your home, it has several options to help keep your home and avoid foreclosure.
As of January 2009, borrowers can finance at least 96.5 percent of the purchase price and put down 3.5 percent. In some situations, when combined with other kinds of loans, you could have a zero down payment.
An FHA loan is available to anyone who would like to avail, but is often used by first-time homebuyers and low to average income homebuyers. However, there are no limits to the qualifications for this type of loan.
Author: Sonia C Llesol
Article Source: EzineArticles.com
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