What Is an FHA Loan and How Can It Benefit You?

If you’re looking to buy a home, you might consider taking out an FHA loan. I’ll go over what an FHA loan is and why it might be a good option for you as a buyer.
Thinking of selling? Get a free home valuationThinking of buying? Search all homes for sale on the MLS If you’re looking to buy a home, you’ve probably heard the term “FHA loan.” Today I’ll go over what an FHA loan is and how it can benefit you as a borrower.
An FHA loan is a mortgage that is insured by the Federal Housing Commission that requires a lower down payment on the condition that buyers pay property mortgage insurance as a part of their monthly mortgage payment.
The property mortgage insurance allows lenders to offer loans to borrowers at much more attractive interest rates with lower down payments. You can qualify for an FHA loan with a lower credit score as well.
The minimum down payment on an FHA loan is 3.5%, but it can be as high as 5%. Borrowers can use their own savings, a gift, or a grant for their down payment. The FHA does allow borrowers to get assistance from their lender, the builder, or the seller to help with closing costs. Although, if the lender helps with closing costs, they typically charge a higher fee on the loan.
The FHA is an insurer, not a lender, so it’s important to get your FHA loan from a qualified FHA lender.
FHA loans also require a two-part mortgage insurance. The first part is paid at the close of escrow, which is equal to 1.75% of the purchase price and can be rolled into your loan. The second part is paid during the life of your loan.
The FHA also has a special loan product for borrowers who are purchasing a private property that may need repairs called the 203K.
The F...