Not everyone can make a large down payment toward the purchase of a home. Alternative solutions exist for those who need a mortgage loan product but who may not get the terms they want from a conventional lender. Potential home buyers may want to look into the possibility of obtaining an FHA home loan. Individuals and couples may put down a mere 3.5 percent and get the funds needed to buy their first home with this FHA insured product.
Do know that with many home loan products available, other options may better suit one's needs. However, homeownership has been achieved for many through being approved for an FHA home loan. Get a better handle on FHA home loans and learn whether or not this product can help you buy a home.
The Basics of FHA Home Loans
There are some requirements that can easily disqualify an applicant from being approved for this type of loan. Applicants should be lawful U.S residents and considered to be of legal age with minimum age requirements varying by state. An FHA loan can be used toward the purchase of a home that will be owner-occupied and may not be used toward buying investment property.
FHA mortgage loan products are intended to help those who may want to purchase a home but are only able to make a small down payment, making homeownership more accessible for buyers in Paradise Hills. Requirements may vary between FHA-approved lenders. As with conventional loan products, a good credit score can make for better terms and more options for an approved applicant. Therefore, paying down outstanding debt and taking steps to improve one's credit score are recommended for those looking to apply for an FHA home mortgage loan.
FHA Loans and Mortgage Insurance
Approved borrowers are making a small down payment and often need to pay mortgage insurance in order to provide additional security to a lender. Mortgage premiums can be paid upfront or be included within mortgage loan payments. This can make it trickier to track how much of the initial loan has been paid off as mortgage insurance payments will not be used to pay down the loan balance, but could be included in each payment. Unlike a conventional loan, mortgage insurance continues until the entire loan is paid off by the borrower. A borrower may choose to refinance and look into a home loan product that is not backed by the FHA in order to stop making mortgage insurance payments.
Basic Eligibility Requirements for an FHA Mortgage Loan
Applicants with a low credit score or who have accrued substantial debt should look at other loan products. Basic eligibility requirements include:
- Consistent and regular payments of debts;
- A steady job history;
- Good credit; and
- Meeting debt-to-income ratios preferred by the lender.
Have a good to great credit score, such as 580 or above? It will then be possible to make a smaller down payment. Individuals with scores under 580 would need to make a minimum down payment amounting to 10 percent.
Exploring Home Mortgage Loan Options
Potential homebuyers should be aware of the mortgage loan products available which would not be considered to be conventional home loan products. FHA loans, VA loans and USDA loans are some of the products that can permit approved applicants to make a small down payment. Do realize that a small down payment may mean homeowners pay more to a lender when paying off the balance of a home mortgage loan. Understand the fine print before accepting any mortgage loan product.