An FHA mortgage is a loan that is backed and insured by the United States government. FHA stands for the Federal Housing Administration, which is a government agency that was created to raise the home-ownership levels in the United States back in 1934.
FHA loans were put in place to allow more people to be eligible for loans. This is possible because FHA loans have flexible qualification requirements. Conventional loans have a stricter criteria than FHA loans because they are not insured by the government like FHA loans are.
The next biggest benefit of an FHA loan is that a smaller down payment is required compared to conventional loans. A common mistake from home-buyers is that they believe you need a 20% down payment to buy a home but that is not true. FHA home loans require as little as 3.5% down. FHA loans are beneficial for first time home-buyers who often do not have a lot of money saved up for a down payment.
With FHA loans flexible qualification guidelines, borrowers with low credit scores are still able to receive a loan. Many borrowers can be approved with little credit history and can qualify in as little as two years after a bankruptcy and three years after a foreclosure.
Lastly, FHA loans are assumable. This means that when you sell your home you can pass off your FHA loan to the new buyer. The new buyer still must pass all the requirements and guidelines before being approved to take over the loan. This benefit could help give you an advantage over other sellers in the market because this can give a new home-buyer the opportunity to save money and assume a lower rate.
If you are interested in an FHA loan or have any further questions please feel free to contact any one of our loan officers.