Whether you are buying or refinancing your home, the FHA mortgage maybe the best option for you. Here are the top 12 Benefits of the FHA Loan:
1. Low Interest Rates- FHA Mortgages tend to have lower rates than Conventional loans. As an example if the FHA interest rate today is 3.75% than most likely the conventional loan rate is 4% or higher
2. Lower Credit Scores- FHA Loans will allow lower credit scores than a Conventional Loan. On a FHA Loan it is possible to get approved with a fico score as low as 580
3. FHA Loans are assumable- This means that sometime in the future you could sell your home and that buyer could take over your FHA mortgage. I believe that in the future there will be a benefit to this based on rates never being this low again. So if you are selling your home and they can assume a rate of 3.75%, that would be much better than your neighbor selling their home and the buyer having to get a new mortgage with a much higher rate. And that buyer assuming your mortgage could be an advantage when selling your home.
4. Deferred Student Loans- FHA Mortgages will not count your future student loan payments in your debt to income ratio, as long as they are deferred for 12mths or longer. Unlike Conventional loans which require to count these future payments in your debts. Someone who has deferred student loans could get approved for a FHA loan, who otherwise could be denied for a conventional loan
5. Parents Can Co-Sign- Someone who is getting a FHA mortgage could have their parents co sign on their mortgage. By having their parents cosign, it could possibly help them afford to buy more home.
6. Higher Debt to Income Ratio- When getting approved for a mortgage, the lender will take into account the amount of your debts compared to your income. This is called a debt to income ratio. FHA loans allow higher debt to income ratios than conventional loans. Allowing someone to buy more home with a FHA loan then with a Conventional loan.
7. Past Foreclosure- FHA only requires that you are 3yrs removed from a finalized foreclosure. Unlike Conventional Loans that now require 7yrs.
8. Down Payment- FHA loans only require a down payment of 3.5%, even with lower credit scores
9. $100 Down Payment- If you buy a HUD foreclosed home, you can qualify for a down payment of $100. This program is in connection when doing a FHA loan.
10. Past Bankruptcy- FHA loans only require that you are 2yrs removed from a past bankruptcy. Unlike a conventional that requires 4yrs.
11. FHA 203k Loan- You can actually get a FHA loan that allows you finance in repairs/up grades for the home, at the same time you buy the home. This loan is called a FHA 203k loan. Guidelines for a FHA 203k loan.
12. Seller Can Pay Your Closing Costs- On a FHA loan you can negotiate to have the seller pay up to 6%(of the home’s sales price) toward your closing costs. This will greatly help reduce the money you will need for closing. In many examples a conventional loan will only allow 3% paid toward your closing costs.
When getting a mortgage it is important to know all your options and decide which one is best for you. This is just 12 examples on why the FHA loan maybe best for you!
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