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The “What’s What” On An FHA Loan

Increasingly more new home buyers are seeking loans and housing instruments backed by the full faith of the United States Government as an alternative to more conventional types of loans. Included in this are FHA loans which are sponsored by the Federal Housing Administration (part of the U.S. Department of Housing and Urban Development).

While FHA loans are backed by the Federal Government, the funds themselves are provided by FHA-qualified lenders. But what does all of this mean? Here’s the What’s What on FHA loans.

Good for First Time Buyers

FHA loans are great for first time homebuyers primarily because of their general flexibility with credit and other financial situations. Since some first time buyers have yet to establish significant credit or are still feeling the effects from student loans or perhaps recovering from other less-than-ideal financial situations, FHA loans are a great option!

FHA loans are backed by the Federal Government which means they are generally easier to qualify for and have lower overall costs associated with them than many types of conventional loans available today.

Credit Considerations

After the housing market crash of 2008, mortgage lending became a much more restricted area of finance; however, the Department of Housing and Urban Development has stood by borrowers despite the financial turmoil a decade ago. As a result, less-than-perfect credit can still see you through to getting approved for an FHA loan.

Competitive Mortgage Rates

Often times when we see government-backed-anything, the connotations are somewhat negative, but when it comes to FHA loans, they are extremely positive. Again, we see how FHA loans make themselves an extremely appealing candidate for first time buyers or those looking to start out in a fresh financial situation.

Closing Costs & Insurance Premiums

Since 2008, lenders are required to collect a mortgage insurance premium (MIP) on almost every loan. While some loans see the insurance private mortgage insurance (known as PMI) disappear once a certain amount of equity has been paid, some retain that premium for the lifetime of the loan, or require a percentage at closing. FHA loans require as little as 3.5% down on the loan which makes the cash necessary to buy a home far less and more affordable than many conventional loans.

Get FHA Ready

Whether you’re milling the idea of a new home or just seeking your mortgage options, Tidewater Mortgage Services, Inc is here to help. One call to Tidewater Mortgage can give you all of the information you need to start your home buying journey and get you pre-qualified for your new home. Call Tidewater Mortgage today to discuss your options for an FHA loan with an experienced, friendly loan officer!

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