Understanding FHA Loans with Cliffco Mortgage
The dream of home ownership isn’t something that’s easily achieved. Putting together the savings necessary and achieving the credit rating you need to qualify for a traditional mortgage that will allow you to purchase a home you want can be difficult. People with credit problems or issues such as bankruptcy can often find it difficult to find financing for a home purchase.
But there is an option out there for those who have issues putting together funding for their purchase. It’s a loan insured by the Federal Housing Association (FHA). According to the website NerdWallet, FHA loans can give potential homeowners competitive interest rates, smaller down payments and lower closing costs than a traditional mortgage. That’s because the federal government insures the loans. At Cliffco Mortgage Bankers, we want you to know about this potentially life changing mortgage loan because we’re in the business of making home ownership possible, so we want to let you know the basics about FHA Loans.
FHA Loans Make Home Ownership Possible for More People
According to Zillow, the FHA program was created in the 1930s in reaction to the foreclosures and mortgage defaults that occurred during the Great Depression. The idea behind these loans is to make financing more available to those who can’t afford a large down payment or have credit issues.
A down payment of 3.5 percent of the purchase price is required to receive maximum financing on an FHA Loan. And you can have a credit score as low as 580, and still qualify for maximum financing. The loans are available for people of all income levels and have flexible income, debt and credit requirements. Another benefit to an FHA loan is that a financial gift from a relative, your employer or even a charitable donation can be used to pay off part or all of your down payment.
Requirements of an FHA Loan
Other requirements needed are proof of U.S. citizenship or evidence of legal permanent residency or eligibility to work in the U.S. You also have to be old enough to legally sign for your mortgage under the laws of your state. You have to have a steady employment history and the property has to be appraised by an FHA approved appraiser. Usually a potential buyer must be two years removed from bankruptcy and three years removed from foreclosure.
Another important requirement for those seeking an FHA loan is that they have to obtain mortgage insurance. Mortgage insurance isn’t unique to FHA loans, it’s usually required on traditional mortgages if a down payment is less than 20 percent of the amount of the mortgage. Borrowers pay an upfront premium at the closing or can have their lender pay the FHA on their behalf. If the lender ends up paying, however, the borrower should expect higher interest rates over the life of the loan. The premium is calculated using the amount of the loan, the loan to value of the mortgage and the length of the loan.
Cliffco Can Help Make Home Ownership Possible
FHA loans give potential homeowners more flexibility as far as income, down payment and credit requirements compared to traditional loans. There are fixed rate and adjustable rate mortgage options available. For more information, contact Cliffco Mortgage Bankers today.