Getting FHA Loans for First-Time Home Buyers
FHA loans have become popular in recent years due to the crash of sub-prime lending following the economic crisis. Although it has been harder to get approved for home loans since then, it’s still easier to get approved for an FHA loan than a conventional mortgage. Individuals who haven’t had an FHA loan and are purchasing a home for the first time can expect approval if they meet the qualification requirements. When considering insurance for an FHA loan, it’s a great resource to check is InsuranceQuotes.org for reliable pricing information. These loans have several advantages, which include the following:
Credit
This is the most important requirement for any loan in today’s world. FHA is much more understanding than conventional lenders are about credit history blemishes. While most traditional lenders won’t accept explanations for credit imperfections, FHA will. As a general rule, FHA will excuse past blemishes if recent credit history shows a pattern of financial responsibility. However, tax liens, defaults and federal liens are grounds for denial. While conventional loans require a credit score of 720 for approval with a prime rate, FHA requires a score of only 620.
Debt To Income Ratio
This amount is calculated by adding all debts and the projected mortgage payment. The amount is then divided by monthly income. Individuals with current student loans, credit cards or auto loans can still qualify. Whether individuals are confident to buy because of an expected raise or a loan that will soon be paid off, FHA allows a debt-to-income ratio of 50 percent.
Interest Rates
Since FHA offers some of the lowest interest rates for 30-year mortgages, monthly payments are very affordable. This means less money is spent over the life of the loan.
Application Process
If individuals have steady employment, enough money to make a 3 percent down payment and decent credit, approval is very likely. The entire process is much easier than the application process of a conventional loan.
Down Payment
This is one of the biggest advantages of an FHA loan. Many lenders are treading on thin ice today, so they often request the full 20 percent down payment. However, FHA only requires 3 percent. In addition to this, FHA allows the seller to pay up to 6 percent of the closing costs.
Since these loans are designed for the benefit of buyers and lenders, homeowners insurance and mortgage insurance are required. Homeowners insurance is factored into the monthly mortgage payment along with estimated real estate taxes. Mortgage insurance is required to protect the lender from potential losses.
Again, to get the most accurate insurance quotes, we recommend you visit www.InsuranceQuotes.org. This web site is provided by a non-profit organization, so this means that the information is current, accurate and consumer friendly.