In the wake of the housing bubble's collapse, FHA loans have taken on renewed importance for today's mortgage borrowers.
Simply stated, an FHA loan is a mortgage insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.
Because of that insurance, lenders can -- and do -- offer FHA loans at attractive interest rates and with less stringent and more flexible qualification requirements.
Following are facts all buyers should know about FHA loans.
Less Than Perfect Credit Is Ok
In Thornton Colorado, the minimum credit scores for FHA loans depend on the type of loan the borrower needs, according to the FHA, but scores should be 580 or better.
Those with credit scores between 500 and 579 are limited to borrowing 90 percent loan-to-value.
A credit score of 500 or less generally means you won't be eligible.
The FHA will make allowances under certain circumstances for applicants who have what it calls "nontraditional credit history or insufficient credit" if they meet requirements. Ask your FHA lender or an FHA loan specialist if you qualify.
Closing Costs May Be Covered
The FHA allows home sellers, builders and lenders to pay some of the borrower's closing costs, such as an appraisal, credit report or title expenses.
For example, a builder might offer to pay closing costs as an inducement for the borrower to buy a new home.
Lenders typically charge a higher interest rate on the loan if they agree to pay closing costs. Borrowers can use the good faith estimate
of closing costs -- commonly known as the GFE -- to compare interest rates and closing costs on different loans and figure out which option makes the most sense
.
To learn more about FHA-backed loans and other mortgages,
go to www.coloradoHomeLoanTeam.com
go to www.coloradoHomeLoanTeam.com
Brought to you by
Kevin Guttman, Sr. Mortgage banker
Top Colorado home Loan Originator
Financing Your Dream
877-251-9709
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