What You Need to Know About an FHA Loan
There are many types of home financing on the market today for clients from all types of financial backgrounds. An FHA loan is one very popular home financing option with great benefits like a low down payment. Schedule a complimentary consultation to get started with Sovereign Mortgage today.
An Introduction to FHA Loans
An FHA loan is a non-conventional loan. In short, that means that it is one of several types of loans insured through a government agency. In this case, that agency is the Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development. This government program was created to inspire private lenders to lend to a broader range of clients with less-than-perfect financial history. Private lenders fund these loans entirely, but they have greater financial security in lending because the government reimburses any loans that default.
Other types of non-conventional loans include USDA (through the U.S. Department of Agriculture) loans and VA loans (through the U.S. Department of Veterans Affairs.
FHA loans and other non-conventional loans differ from conventional loans, which are not backed through the government. Both conventional and non-conventional loans have unique benefits to consider. And FHA loans have unique benefits when compared with other non-conventional loans.
The Benefits of an FHA Loan
This type of government-backed loan is popular for several reasons.
- Many types of clients are eligible, including those with less than perfect credit and financial history.
- Fixed-rate terms are available from 15-30 years.
- FHA loans have among the lowest down payments available, as little as 3.5%.
- Loans may be used on single-family homes, 1-4-unit properties, and certain approved manufactured (trailer) homes and condos.
- Clients who have purchased homes previously and first-time buyers are both eligible.
Eligibility for an FHA Loan
As stated, eligibility requirements are laxer than with traditional conventional loans. Baseline requirements for approval include:
- A credit score of 580 or higher for 3.5% down payment or 500-579 for a 10% down payment.
- No outstanding federal debts
- An agreement to live in the home as the borrower’s principal residence
The Dream of Owning a Home is Achievable
If you have always dreamed of owning your own home but feared that your financial past or credit score may hold you back, think again. At Sovereign Mortgage, we care about our clients, and we work hard to help them get a yes on home financing. If you are considering an FHA loan or other mortgage option in Florida, we can help. Contact us to schedule a complimentary consultation.