The loan program managed by the Federal Housing Administration (FHA) provides multiple benefits to home buyers. Before obtaining an FHA home loan, Helena, MT residents should gain an understanding of these benefits and whether this loan product is the right fit for their needs. One benefit of these loans is the lower interest rate they offer compared to conventional loans.
Other important benefits of provided by these HUD-insured home loans include.
Smaller Down Payment
The popularity of FHA home loans is due in large part to the traditionally low down payment required. With the down payment of as low as 3.5% needed to purchase a home through this program, many home buyers, especially first-time home buyers, take advantage of this home loan option. Depending on the lender, you may be required to put more than 3.5% down for a conventional mortgage loan.
Lower Credit Scores and Debt Ratios
You may be able to qualify for an FHA home loan if your credit score is below the level required to obtain a regular mortgage loan. Generally, the credit score requirement is a little lower than the requirement under conventional financing arrangements. Those with credit scores as low as 500 may qualify.
Flexible Qualification Guidelines
Regular or conventional home mortgage loans generally have more stringent qualification criteria then those used for FHA loans. The reason is that lenders receive government insurance through the FHA program which protects them from potential losses from the default of a borrower.
HUD “Streamline” Refinance Program
Another benefit of FHA loans is the ability to refinance the loan sometime in the future. Streamlined process that requires minimal paperwork and other hassles often connected with the home refinancing process for conventional loans. Often, a property appraisal is not required within FHA streamlined refinance.
FHA Loans are Assumable
And FHA home loan may be assumed by home buyer. In other words, if you sell your home to someone in the future, you may transfer your FHA loan to the individual who makes the purchase.
Down Payment Gifts
Down payment gifts are allowed with many types of mortgage loans. These gifts occur when a family member or another approved donor gives you money as a gift to cover a portion of your down payment. This gift amount may be limited for conventional loan. However, within an FHA loan, someone could conceivably gift you the entire amount of the down payment.
