The current economic condition indeed took its toll on everyone and affected a lot of their means. This negative impact made a lot of people feel too hesitant of purchasing a home using a conventional home loan. The economy had hit a lot of people's credit standing and left an unwanted record, making them ineligible for conventional mortgage loans.However, the government had observed this housing crisis and established the Federal Housing Administration (FHA) to assist people in becoming homeowners themselves. The FHA loan requirements are even amended for people to meet the requirements easier.
So what is this FHA and what is FHA home loan and how can these help people in obtaining a home?
As mentioned earlier, FHA is established by the government aiming to help people to become homeowners. Although FHA does not create the loans, it secures or insures the loans provided by private lenders or, mortgage companies. So basically, loan applicants still need to contact lenders or mortgage brokers to probe if they can originate FHA loans and start from there. The applicants will be assessed by the lenders and may be provided of certain guidelines about the appropriate home they can afford based on their debt-to-income ratio.
When it comes to advantages and benefits, FHA home loan program has a lot of these in store for everyone. Below is a list of what people can experience and receive as benefits from an FHA home loan. This way, people can easily gauge their capabilities when deciding to use FHA home loan.
Down payment – FHA requires 0-3% down payment while conventional loans require 5%.
Monthly mortgage insurance – this is lower than the conventional loans.
Origination fee – 1% is the maximum while conventional loans has unlimited origination fee.
Credit score requirements – There is no credit score requirements for FHA home loan unlike conventional ones that strictly demand for it.
Closing costs – FHA home loan has this category controlled while conventional loans have no control on the amount or type of loan closing cost.
Eligibility after bankruptcy – Applicant can qualify for FHA home loan two years after bankruptcy while conventional loans require applicants to wait for four years to qualify.
Eligibility after foreclosure - Applicant can qualify for FHA home loan three years after foreclosure while conventional loans require applicants to wait for four years to qualify.
Qualifying ratio – FHA home loan is higher than the conventional ones.
Credit – Seller can credit up to 6% to the buyers' closing costs while other conventional loans' maximum credit is 3% only.
Termite report and clearance – This is required on all purchases while other conventional loans do not.
Property condition – FHA home loan requires the property to meet minimum condition standards while there is none on other conventional loans.Though it is really tough for people to obtain a home, FHA home loan can assist them in fulfilling it. FHA is established to do so and people just need to take advantage of these benefits presented by FHA by reviewing its requirements and eligibilities.
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