If you are a family that has a low to moderate income and are looking for a mortgage loan going through the Federal Housing Administration is a great option. This is a government backed program that helps families get into a new home of their own at a lower initial cost.
It is important to recognize that the FHA does not give out mortgage loans but instead insures a mortgage loan for you. By doing this it can make the mortgage loan cheaper by thousands of dollars. By insuring the loan it also encourages the bank to give loans to people with little to no down payment. If you qualify a FHA insured home loan is the way to go.
When using this program you are able to buy a new or used home. You can buy anything from a one to a four family home depending on what you are looking for. It is necessary that you reside in the home for the extent of the loan.
There are many benefits that you receive if you get your mortgage through the FHA program. One is that it can help you to obtain a lower interest rate loan rather the a higher interest rate sub-prime loan. Getting a lower interest rate on your mortgage can save you thousands of dollars throughout the length of the loan. It is truly amazing how much just a percentage point can make.
Another benefit is that some people do not need to have a down payment in order to obtain a mortgage loan. If you have to have a down payment then it is substantially less that in a non FHA insured loan. Instead of the regular rate of ten percent you may only need to have three percent considerably lowering your initial costs.
You will also benefit from the FHA limiting the fees that you can be charged. One example of this is that the fee for the loan origination cannot go over one percent of the mortgage. There are many loan companies that can try to rake you over the coals on these types of fees. Be careful.
There are a few things that come with FHA loans that are not as nice. This makes these loans a poor choice for some borrowers. FHA sets limits on the amount that you can make for your loan. This is to make sure that the program is not being abused and is used only by families in the approved income bracket.
Some people may also find it to be a disadvantage that you must reside in the home for the full length of the loan. If you are looking to buy a home as a vacation spot or looking at it as an investment then this is not the program for you. The reason for this rule is that they are trying to get families into their own homes.
When getting your mortgage loan through FHA you need to use an approved financial institution. The good news is that there are many institutions that are approved. Before rushing out to the first bank that will work with you, it is important that you still research which one will give you the best possible deal. Make sure though when you are researching that you have a copy of your current credit report. Do not. I repeat Do Not let the banks and financial institutions run your credit report when you are just shopping around. Every time someone checks it there is a ding on your points score. So Shop wisely.
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