Every day you can read about all the foreclosures on the market. This has many people wanting to buy homes. Some are first time home buyers or others wanting to upgrade a current home. For those people, there are great benefits of FHA mortgages.
FHA does not actually make the loan, they will accept applications and process them. An underwriter comes in to actually close the loan. FHA is the government guarantee behind the lender.
Since they are government backed most people can get a loan with a very nominal down payment. First time buyers can see if they qualify for down payment assistance. That is the beauty and also some of the requirements behind this program. It is aimed at first time buyers, and to make getting loans easier for most everyone.
These loans typically have lower interest rates and allow you a smaller payment. The credit requirements will need to be met. They will have a FICO score minimum that needs to be met. There will also be income guidelines to meet.
Not everyone can qualify to borrow in this method. If you are buying a home as an investment to rent out, you would need to get a standard conventional loan.
There are limits on the price of the home you can purchase. It is based on the state and demographic area you live in. This is another way the program benefits more people. It is not really there to finance mansions.
With FHA backed loans, you will see that the rates will not adjust during the loan period like a typical adjustable rate mortgage can. Debt ratios are also higher than conventional loans out there. That may make it seem risky, but with government backing, there is little worry, despite recent issues in the market.
For homes in foreclosure and needing work, there is a special repair fha mortgage programs that allows the property to get into livable condition. It sets up extra funds, and through a variety of contractors helps get the property up to code. There is some work, like painting that you can do yourself. If any work does have to meet an inspection, it is best to have a professional complete it as part of the requirements can be strict.
FHA is popular for those with low to mid level incomes. After all the program was created and benefits of FHA mortgage loans was for this demographic. Use of this program can help most every family.