With so many advantages to the FHA program coupled with conventional loans becoming increasingly difficult to qualify for, numerous borrowers have turned toward government-backed FHA mortgages.
Here are six major advantages to FHA loan financing which have contributed to its rising popularity:
Unlike conventional loans which typically require a down payment equal to 20% of the home’s purchase price, FHA financing allows borrowers to make down payments as low as 3.5%.
Furthermore, the United States Department of Housing and Urban Development (HUD) offers a $100 down payment sales incentive on HUD-owned foreclosed homes in select states (visit the HUD $100 Down Payment Incentive page for more information).
FHA also provides homeowners with flexible down payments. According to FHA regulations, the funding for a down payment does not necessarily have to come from the borrower. The funding can come from any source, including a gift from a family member, a gift from an employer or even through a charitable organization.
One of the main reasons behind the surge in FHA loan popularity is that the Federal Housing Administration has lenient requirements regarding borrower’s credit scores. Since the government assumes the risk of the loan, lenders do not heavily weigh borrower credit scores, and borrowers with low credit can secure decent mortgage rates with a stable source of income and steady employment. Even those who have undergone a foreclosure or bankruptcy will find it much easier to qualify for FHA financing with a low credit score.
FHA mortgage financing can be utilized to purchase a variety of property types, including single-family homes, new construction homes, condominiums, manufactured homes, and one-to-four family homes.
The Federal Housing Administration does not determine borrowers’ interest rates on FHA loans; rather, private lenders do so. However, since the FHA assumes the risk of the loan by insuring it against default, lenders can offer borrowers extremely competitive rates, even to those with damaged credit.
The most substantial advantage to FHA financing and a primary reason for its market growth is the ease in which borrowers can qualify. With relaxed loan qualifying criteria in place, college students, first time home buyers, and bad credit buyers can secure a home loan and purchase a home with minimal hassle.
With the loan backed by the government, private lenders have more incentive to negotiate favorable qualifying terms for FHA loan applicants.
By protecting private lenders from potential defaulted loans, Federal Housing Administration financing offers many borrowers a chance at homeownership that may not have otherwise been available through other loan programs.
Didn't find the answer you wanted? Ask one of your own.
Ask our community a question.
Searching Today's Rates...
Featured Lenders
Omega Financial Services
Union, NJ
Vision One Mortgage
Huntington Beach, CA
El Conquistador Mortgage, Inc.
Oro Valley, AZ
Mortgage Store Commercial
Scottsdale, AZ