FHA loan is a government-backed mortgage that’s insured by the Federal Housing Administration (FHA). This type of loan is popular among those who are buying a house for the first time. They allow you down payments of 3.5% for credit scores of 580+. With this loan, you have to remember that lower your credit score, higher the interest borrowers will receive. If a borrower defaults on an FHA mortgage, then the FHA will pay off the balance debt and take possession of the house.
For borrowers, interested in buying a home with an FHA loan, it is important for them to have a down payment amount of 3.5% and have a look at FHA loan guidelines. The credit score and down payment amounts are 2 requirements for FHA loan.
Who can opt for FHA Loans?
Candidates that can go for FHA loans:
- Borrowers with low credit rating
- Anyone who is not able to afford large down payments
- If you have a high debt-to-income ratio
- Buying a house for the first time
The loan limits provided by FHA increased in 2017 from $271,050 to $275,665 for low-cost areas. This is the maximum loan limit provided by FHA in 60% of the country.
Why one requires an FHA loan?
- An FHA loan is the easiest type of mortgage loan to qualify for because it requires a low down payment and one can have a perfect credit.
- Borrowers are not able to qualify for private mortgage insurance or are not able to afford 20% down payment, can go for FHA loan.
- It is an assumable loan which means that if you want to sell your house, the buyer can “assume the loan you have.” If you are facing bankruptcy, you might still qualify for FHA mortgage.
FHA loans are an easy way of getting sanctions for various kinds of requirements. These loans come with FHA loan guidelines and provide easy and quick loan qualification.
It is advised, no matter what kind of reason you apply for a loan, one should always go through the FHA loan guidelines.