All You Need To Know About FHA Loans
Buying a home is not only for people with perfect credit and 20% down!
In many housing markets, especially competitive ones, saving up for a down payment at 20% of a new home’s cost feels impossible. Many people struggle with debt, a tough credit record, and other financial constraints that perpetuate the renting cycle and make saving and building equity incredibly difficult. Fortunately, there are loans available that address these concerns and make home buying more attainable for all financial backgrounds.
What are FHA loans?
FHA loans are mortgage loans insured by the Federal Housing Administration (FHA) instead of a bank. The FHA is a government agency in place to keep the housing market alive and well, and FHA loans protect lenders from the risks of homeowners defaulting on their mortgages.
What are the benefits?
FHA loans come in handy for homebuyers who don’t have great credit or who do not have the standard 20% down payment available. Requirements for down payment depend on credit score, but can start as low as 3%. With a credit score of 580 or higher, you’re well-equipped to take out an FHA-backed loan, but even a score as low as 500 can get you into a new home!
With FHA loans, interest rates are generally lower than they would be with a conventional loan of the same amount. As with any loan, it’s always best to shop around a bit for the best rates before choosing an FHA-backed lender.
Another aspect of buying a home that often keeps people away are closing costs. With FHA loans, closing costs fall more heavily to the lender and seller, so your savings can go right to your down payment.
Who qualifies?
In order to qualify for an FHA loan, you need to be purchasing your primary residence, not a vacation home or second property. It’s fine if you’ve owned homes before, as long as this loan is for your new primary home. You’ll also need to get your home appraised by an FHA certified appraiser.
What are the costs?
The percentage you’ll need to save for a down payment will depend on your credit score. Those with a score of 580 or higher can put down as little as 3%, and between 500 and 579 you’ll need to put down 10%.
Another cost associated with an FHA loan is the mortgage insurance. This comes in the form of a premium up front as well as a monthly payment up until you own 20% of the home.
The process of securing a loan for your home can be overwhelming! For more guidance on financing your home, reach out to Atmos to begin the pre-approval process. Get started building your custom home today!
