Why FHA Loans Are Great for First-Time Home Buyers
April 10, 2020
FHA home loans are great for first-time home buyers; the are among five types of home loan considered by some published reports to be “the best” mortgages for first-time house hunters. But what makes FHA mortgages a good choice for those buying or building their first home?
Flexible Loan Guidelines
FHA mortgages require a borrower to have two years of employment history, though that history does not have to be with a single company or employer.
There are flexible income guidelines that allow seasonal workers, those earning commissions, self-employed borrowers, and contractors to qualify for a home loan the same as a more traditional employee.
Competitive Interest Rates
In recent years, interest rates have pushed far lower on some days than many expected. At the time of this writing, those rate drops have been happening more often than not due to world economic headlines, fears of the coronavirus,the quarantine at Wuhan, and other factors.
FHA loans, as government-backed mortgages, have always enjoyed more competitive mortgage loan interest rates. But when rates move sharply lower, the advantage of an FHA mortgage is clear; these loans can and do cost less over the lifetime of the mortgage where the interest charges are concerned.
Low Down Payments
If you have the resources to make a 20% down payment on a conventional mortgage to avoid mortgage insurance, that’s a great place to be. But many homeowners simply cannot come up with a 20% down payment, and FHA mortgages only require 3.5% down unless your FICO scores are within a certain low range that requires 10% down instead.
But even 10% down doesn’t cost nearly as much as a 20% down payment; the FHA loan can be a major help for borrowers who face down payment concerns.
No Early Payoff Penalties
FHA loan rules expressly prohibit being charged a penalty for paying off your loan early, overpaying on your monthly mortgage payment, etc.
Mortgage Insurance Required
Even conventional loans and USDA loans require mortgage insurance premiums; to get out of mortgage insurance for a conventional loan you must put 20% down. FHA mortgages feature a mortgage insurance premium for either 11 years or the lifetime of the mortgage.
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Flexible Loan Guidelines
FHA mortgages require a borrower to have two years of employment history, though that history does not have to be with a single company or employer.
There are flexible income guidelines that allow seasonal workers, those earning commissions, self-employed borrowers, and contractors to qualify for a home loan the same as a more traditional employee.
Competitive Interest Rates
In recent years, interest rates have pushed far lower on some days than many expected. At the time of this writing, those rate drops have been happening more often than not due to world economic headlines, fears of the coronavirus,the quarantine at Wuhan, and other factors.
FHA loans, as government-backed mortgages, have always enjoyed more competitive mortgage loan interest rates. But when rates move sharply lower, the advantage of an FHA mortgage is clear; these loans can and do cost less over the lifetime of the mortgage where the interest charges are concerned.
Low Down Payments
If you have the resources to make a 20% down payment on a conventional mortgage to avoid mortgage insurance, that’s a great place to be. But many homeowners simply cannot come up with a 20% down payment, and FHA mortgages only require 3.5% down unless your FICO scores are within a certain low range that requires 10% down instead.
But even 10% down doesn’t cost nearly as much as a 20% down payment; the FHA loan can be a major help for borrowers who face down payment concerns.
No Early Payoff Penalties
FHA loan rules expressly prohibit being charged a penalty for paying off your loan early, overpaying on your monthly mortgage payment, etc.
Mortgage Insurance Required
Even conventional loans and USDA loans require mortgage insurance premiums; to get out of mortgage insurance for a conventional loan you must put 20% down. FHA mortgages feature a mortgage insurance premium for either 11 years or the lifetime of the mortgage.
------------------------------
RELATED VIDEOS:
Homebuyers Benefit From the Work Done by Fannie Mae
HUD 4000.1 is Sometimes Called the FHA Handbook
Credit History Is Presented as Your FICO Score
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