When it
comes to qualifying for a home loan, there are many different types of programs
available. With the many different home loan programs available, it is
important to choose the best program for your particular mortgage loan needs.
One of the
home programs you can choose from is a FHA mortgage. This type of program is
designed for 1st time home buyers. FHA home loans can be used to purchase a
primary residence or refinance an existing home loan. Below are the many
benefits to the FHA program.
Reduce Down
Payment
A FHA
mortgage loan offers buyers a program with a lower down payment. The current
minimum down payment for a FHA loan is 3.5%. The source of the funds for the
down payment can also come from many different sources including a gift from a
family member or church, a 401K loan or withdrawal, and any money saved up in a
checking or savings account. By allowing the down payment to come from many
different sources, the FHA mortgage loan program helps buyers purchase their
new home.
Seller Paid
Closing Cost
FHA loans
also allow the seller to contribute up to 3% towards buyers closing cost. This
is extremely important in assisting a client purchase a new house and reducing
the amount of money needed for closing. Sellers can pay closing cost, prepaid
items like taxes and home insurance as well as interest on the loan. For
example, if a buyer purchases a home for $200,000, the seller can contribute
$6000 towards the buyers closing cost.
Lower
Mortgage Rates
For many
people, FHA home mortgages offer the best rates. FHA loan rates are not tied to
credit scores like the way conventional mortgage rates are. For example, if a
client has a credit score of 660, the FHA home loan the rate would be same if
their score was 740, but on a conventional home loan, the credit score of a 660
compared to a 740 would see an increase of about.75% to the rate.
Mortgage
Insurance
Another
benefit in the FHA mortgage loan program
is the approval of mortgage insurance. FHA mortgage insurance is approved as
long as the mortgage is approved. This is not the same when it comes to a
conventional home loan. Many times, a home buyer can be approved for a
conventional mortgage, but will not be approved for mortgage insurance. This
results in the denial of the home loan, but with a FHA mortgage loan, as long
as the loan is approved, mortgage insurance is approved. Also, the monthly
mortgage insurance payment for a FHA mortgage is usually less than the private
mortgage insurance offered on conventional home mortgage loans.
Mortgage
Amount Limits
FHA home
loans do have set loan limits that are established by HUD. To determine the
loan limit in your area, contact your mortgage loan advisor. For example, in
the Dallas - Fort Worth area, FHA loan limits are $271,050.
Streamline
Refinances
Finally, one
of the best benefits to a FHA mortgage is the ability to do a streamline
refinance. A streamline refinance is when a homeowner refinances an existing
FHA mortgage loan into a new FHA mortgage loan. The streamline refinance
program allows the client to refinance with limited paperwork. Though, it might
be in the best interest of the client to consider a full refinance over a
streamline. Consult a home loan officer to see which program is best for you!
FHA loans
are a great way to refinance or purchase a home. It is important to understand
the benefits of each home mortgage loan program that you are applying for and
to make sure you are getting the best possible mortgage loan.
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