Buying a home is a beautiful feeling, but dealing with the financial aspect of it can be tiring. Well, thanks to mortgages, the financing is no longer a headache. From conventional mortgages to Government-insured mortgages, homeownership is now a dream that can be turned into reality once you have done your homework, arrived at a budget, reviewed your credit and nailed down your down payment amount.
The America government is not a mortgage lender but has been helping many Americans become homeowners. How? Through government agency loans, namely:
– Federal Housing Administration also known as FHA loans
– The U.S Department of Agriculture also known as USDA loans
– U.S Department of Veteran Affairs also known as VA loans
This article will cover FHA loans: how it works, who is eligible, and everything you need to know about it.
What are FHA Loans?
FHA loans give borrowers who do not have a significant downpayment saved up and don’t have good credit the opportunity to own a home. Since its inception in 1934, FHA has insured over 40 million home loans.
Types of FHA Loans
FHA mortgagee loans come in different types- it depends on your assets, income, age, and some times your current home equity. There are seven types of FHA loans, which include:
– Fixed-rate purchase loan
– Adjustable-rate purchase loan
– Condominium loans
– Secure Refinance loan
– Home Equity Conversion Mortgages
– Graduated Payment loan
– Growing Equity Loan
Like other kinds of mortgage loans, FHA loan comes with its closing cost. However, expenses may be different from lenders, market conditions, geographic location, and down payments.
If you wish to lower your closing cost, you can do so by increasing your credit score, shop from multiple lenders, check for settlement and title companies, or negotiate with the lender.
FHA Loan Pros and Cons
FHA loan as many benefits such as low down payment, better interest rate, and flexibility with a credit score. The only downside of FHA loan is that you have to get mortgage insurance that stays with you throughout the life of your FHA loan.
What You need to qualify for an FHA Loan
Driver license, military ID, passport, or any other kind of government-issued ID.Last two-months statement of your bank and Investment accountPrevious two years’ income statementsPay stubs for at least a month.
If you run a business or you are self-employed, you will be asked to provide:
– Your current tax year profit and loss statement
– At least two of your recent tax returns.
Talk to a mortgage and loan specialist to get the process started.