A Closer Look At FHA Loans
FHA Loans are government secured loans designed to allow low to moderate income home-buyers afford a house with a more lenient credit score and a small down payment as opposed to the traditional home mortgage.
Anyone can apply for an FHA Loan up to a certain degree called a lending limit. FHA mortgage insurance must be paid for at least five years, regardless of how much equity you build. After five years and if you loan-to-value ratio is below 78 per-cent, you can cancel the FHA mortgage insurance. In addition, like your interest rate, how much you pay is determined by your credit along with your circumstances such as down payment, value of loan, and so on. Since the FHA insures the loan, the government will pay the lender for any losses on the loan. However the borrower still pays for a part of this insurance through the mortgage insurance itself.
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FHA is attractive for many reasons. And it’s even easier get approved for one as:
- Decent Credit (at least a 633 score)
- 3.5% down payment
On the flipside however, a traditional mortgage will require:
- Good Credit (700+ score)
- Up to 20% down payment
Don’t forget to shop around and don’t just limit yourself to one place!