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6 Top Advantages to FHA Mortgages
FHA Ruling Regarding MIP
In recent years, the government made a new rule that MIP would be required to remain on the loan throughout the term, as opposed to dropping off at a certain loan to value ratio. This ruling was upsetting to many, but we need to keep in mind there are many other advantages to FHA-insured mortgages.
You will read and hear a variety of opinions regarding mortgage loan products, so it does not hurt to become an informed buyer and weigh the facts for yourself.
Even some real estate agents do not understand the differences between FHA and Conventional financing. Because of this, these agents inadvertently exclude a large segment of potential buyers from their seller’s home they are marketing.
The Advantages to FHA Mortgage Loan Financing
- FHA loans are flexible and have lower down payment requirements than most other mortgage loan products. Many buyers in today’s economy do not have large down payments for their home purchase. Nearly 1 in 5 U.S. buyers use an FHA loan to finance their purchase. They may have everything else in place, but not be liquid enough for such a large down payment. With rental rates skyrocketing in many markets; it makes sense for families to purchase a home as opposed to paying rent.
Can you see if you were a homeowner trying to sell a property how many potential buyers might be overlooked if your agent marketed only in cash or conventional prospects!
- FHA Down Payment Requirement is 3.5% of the sales price
For many homebuyers, there are only a few mortgage products available for such a low down payment, unless you can qualify for a VA loan with 100% financing.
- FHA Allows 100% Gift Funds
There are very few, if any, other mortgage loan products available that will allow a homebuyer to receive a gift for the down payment amount.
- There is Numerous FHA-Approved Lenders Available
The marketplace for FHA mortgage loans is large. Therefore, be sure and shop around for rates and terms. This environment creates competition, which is always good for the consumer.
- There are different Types of FHA Loan Products
A homebuyer can qualify for and obtain 30 and 15-year-fixed-rate mortgages as well as a series of adjustable-rate mortgages. In addition, the FHA insures loans for properties that may need some improvement made to them. These specialty loans, such as the 203 (k), which enables the buyer to finance the rehab costs into the purchase mortgage. The 203 (k) loan also allows the borrower to finance additional energy-saving improvements into the loan.
FHA has Flexible Credit Standards
Of all the different types of mortgage loan products available FHA loans are more forgiving in many ways. Therefore, underwriters look at the entire credit file as opposed to just considering the credit score. Many times, isolated credit events will be reviewed and taken into account on an individual basis. The waiting period after bankruptcy and foreclosure events are more lenient under FHA guidelines.
These are but a few of the advantages for homebuyers considering an FHA mortgage loan. I would like to invite you to give me a call. We can talk about what works best for you in regards to mortgage financing and home ownership.
I look forward to hearing from you!