The FHA loan program was designed to help those who have trouble getting a home purchase a new home. In fact, the FHA loan program is the oldest loan program in the US. It’s been helping people get homes from close to 90 years. Created during the great depression and insured by the Federal Housing Administration, this loan’s sole purpose was to help lenders bring affordable loan terms to the public with competitive rates and flexible options. So why should you consider an FHA loan? What makes it so effective? Why has it lasted this long? The answers are simple. Affordability and Flexibility.
Unlike other loan programs that offer low to no down payment, the FHA loan program is not restricted by geography or income. In fact, the FHA program is available everywhere and with any income. This makes the program effective for the majority.
Are you worried about your credit score or the amount of down payment you’ve saved? If so, FHA may be the perfect program for you. It offers options for many people with lower credit profiles. Anyone with a credit score above 580 is offered a down payment of 3.5%. If you have a credit score below 580, you still have the option of a 10% down payment. FHA also ties into many down payment assistance programs. This makes it a safe alternative to your typical no money down loan programs. The program allows for more options to come up with a down payment, including a gift from acceptable sources or a secured loan providing you have room in your debt-to-income to accommodate the extra debt.
FHA doesn’t restrict you to only the popular 30-year fixed rate purchase loan. They offer a multitude of programs and options to ensure that you are continually receiving the best terms based on your situation. These include fixed rate, adjustable rate, purchase, rehabilitation, construction, reverse, refinance, and streamline loans. You can do these loans on an array of property types including manufactured homes and multi-unit properties.
The FHA adjustable rate mortgage option is one of the most protective versions of adjustable rate mortgages available. They have better caps on both yearly and lifetime caps making them a go to for those looking for an adjustable rate mortgage.
The FHA 203(k) rehabilitation loan is great for those who are unable to afford the renovations on their home they’ve been dreaming about, but want to add functionality and value to their home. If you are planning to renovate your home and the value will increase, this loan may be right for you. And it offers the same 3.5% down that the FHA purchase loan requires.
FHA construction loans are a competitive alternative to your conventional construction loans. They offer flexibility with regards to draws and contractors. They also offer a 3.5% down payment compared to a conventional 3.5% down payment.
Those who are over the age of 62 with equity in their home may consider an FHA Home Equity Conversion Mortgage or Reverse Mortgage as it’s more commonly called. With a HECM education course, you could use the equity in your home to give you a monthly supplement to your income or a lump sum. Be sure to talk to one of our experts to see if this is a good option for you.
Refinances are easier with FHA. A straight refinance offers options for those with lower credit scores. If you already have an FHA loan, you may have the option to do a streamline refinance. This program allows you to refinance to lower your mortgage insurance or rate without requiring an appraisal.
The benefits of the FHA program are boundless. You can ask the seller to pay up to 6% of your closing costs and you can assume a current FHA loan from a current FHA mortgage holder if you qualify based on terms of their current mortgage. You can purchase a multi-unit property with 3.5% down and use the rental income from the other units to help offset the mortgage payment. The mortgage insurance you pay monthly goes down over time meaning your payment drops over time.
It’s important to understand that FHA does not loan directly to the public. They require approved lenders to lend money and FHA then will insure the mortgage. This means that FHA will cover the loan if it defaults. FHA’s insurance that they would not be responsible to cover the entire cost of the loan if it defaults is what eases lenders into issuing loans. They do this by charging an Upfront Mortgage Insurance and a monthly Mortgage Insurance.
Reach out to one of our FHA professionals if you’re wanting to purchase or refinance a home. We’d be happy to discuss your situation and determine if an FHA loan is best for you!