The first time that you plan to invest in a home of your own, you will be faced with many important decisions. Perhaps one of the biggest decisions is what type of mortgage loan you choose to make the purchase. While you could always go through a lender and get a traditional mortgage loan, there are really good reasons to ask about available FHA loans instead. If you are unfamiliar with FHA loans, you are bound to have a few questions. Take a look at some of the most commonly asked questions about FHA loans first-time homebuyers have and the answers you will want to know.
What exactly is an FHA loan anyway?
FHA stands for Federal Housing Administration, which is an sect of the United States Department of Housing and Urban Development. FHA loans are mortgage loans that are completely backed by insurance that is offered by the Federal Housing Administration. When you obtain an FHA loan, you will also pay for this insurance, which will step in and cover the cost of the loan if something happens and you do not make your payments or default on the loan. Because of this coverage, lenders are more willing to work with borrowers who may not have the standard credentials, such as an excellent credit history.
What are some of the advantages of FHA loans over traditional home loans?
Obtaining an FHA loan offers you several advantages as a buyer, especially if this will be your first time buying a home. Some of the most noteworthy perks of FHA loans include:
- longer repayment terms with lower monthly payments
- lower down payment costs
- the chance to have homeowner's insurance and other costs of homeownership included in your monthly payments
- less stringent terms to get the loan, such as less attention to your credit rating
Where can you find out if you qualify for an FHA loan?
Most regular lenders do make it possible for you to apply for an FHA loan through them and the qualification process is fairly relaxed with no limits on income. Therefore, whether you are working with a bank or a mortgage company, you should ask if they have FHA loans available as an option. If they do, you can go through the application process for an FHA loan, which is similar to a traditional mortgage or home loan application, and you can find out if you will qualify for a loan backed by FHA.