FHA loans are special types of mortgages designed to make homeownership available to more people. Insured by the Federal Housing Administration (FHA), from which they get their name, these home loans offer:
- Reduced closing costs
- Lower down payments
- Fewer qualification hurdles
Because it’s easier to secure an FHA loan than it is to obtain a typical mortgage, first-time home buyers flock to the program. Here are a few fast facts you should know about these loans:
Lower Down Payments
While the average down payment sets buyers back around 20 percent of the final purchase price, an FHA loan is available for as little as 3.5 percent of the total cost of the house—as long as the borrower has a credit score of at least 580.
Although a credit score of less than 500 might disqualify you, those who fall in between the two extremes have an option to pay a 10 percent down payment, which is still an improvement over the typical mortgage.
Reduced Closing Costs
When it comes to closing costs, the government has done some creative thinking. Not only do FHA loans offer reduced fees, but, in some cases, they may permit a builder or seller to pay off the closing costs for you.
Securing an FHA Loan
The lower down payment and reduced closing costs alone make FHA loans attractive to potential homeowners, but when you add in the easier qualification process, they make a great deal of sense. Keep in mind, however, that you’ll need find an FHA-approved lender in order to secure a mortgage.
You can learn more about FHA loans and how Elite Financial can help you through the qualification process by continuing to read through our website.