Are you planning to purchase a home in the near future? If so, you have probably already begun to think about the need to secure a mortgage loan. What you may not realize is that there are several different types of home loans that you could qualify for. One of these types of loans is an FHA loan. For many people, FHA loans prove to be the most beneficial option available. Below you can learn more about some of the benefits which these home loans have to offer.
Benefit #1: Lower Credit Score Requirement
One of the biggest factors in whether or not you will qualify for a home loan is your credit score. When applying for traditional mortgage loans. the required credit score will often be higher than when applying for FHA loans. If your credit score is less than perfect, choosing to apply for an FHA loan can greatly improve your chances of being approved.
Benefit #2: Lower Down Payment Required
One of the biggest hurdles for many people to overcome when trying to buy a home is the ability to save up enough money for their down payment. FHA loans are often able to help with this issue since they routinely require a much smaller down payment than other types of home loans. In many cases, this down payment will be equal to just a few percent of the total purchase price of your home.
Benefit #3: Looser Gift Allowances
It is quite common for people to receive gifts in order to help cover the cost of a down payment and closing costs when purchasing a home. With a traditional mortgage, the people who are able to give these gifts are typically limited to immediate family members and spouses. With an FHA loan, the people who can contribute to your home purchase will include family, friends, and non-profit organizations. For this reason, FHA loans are often required for people who wish to take advantage of home buyer programs that offer assistance with down payments or closing costs.
Benefit #4: Lower Mortgage Insurance Rates
It is quite common for lenders to require individuals to carry mortgage insurance for the first several years of their loan. While this requirement is also present when obtaining an FHA loan, the insurance rates associated with an FHA mortgage are often lower. This is because lenders are taking less of a risk since FHA loans are backed by the federal government.