A FHA Loan is a specialized type of loan insured by the Federal Housing Administration. Because it is insured by the FHA, loan agencies are able to offer you a favorable deal they wouldn’t otherwise be able to approve. They are favored by home buyers due to their low down payments (as low as 3.5% with a 580+ credit score) and relatively easy qualification requirements. FHA loans are widely considered the easiest loan to secure. Homebuyers with credit scores as low as 500 can still qualify with only 10% down. However, the lower the homebuyer’s credit score, the higher the interest rate on the loan.
FHA loans do require mortgage insurance for those who qualify, which is an expense you’ll want to calculate into your monthly payment budget prior to closing. Also, if you ever decide to sell your home, the loan is “assumable,” meaning that it can be taken over by the home buyer rather than the hassle of waiting for another lender’s involvement in your sale.
The FHA loan is perfect for those with less-than-stellar credit scores, and for those who cannot afford the typical 20% down of private loans. Those who have been foreclosed on or have undergone a bankruptcy may still qualify for an FHA loan.
Click here to get pre-qualified.