An FHA loan is specifically designed to help first-time home buyers fulfill their dream of owning a home. By making the process easier, they can help those who may be feeling overwhelmed and intimidated by the home-buying process.
An FHA loan is a specific mortgage product insured by the Federal Housing Administration. Because the federal government insures the loan, lenders are able to offer better deals to borrowers. FHA loans cannot be used for just any type of home purchase, though. They are specifically for new or existing single family homes, one- to four-family homes, a condominium unit, or a manufactured home on a permanent foundation.
Advantages of an FHA Loan
- Low down payment. An FHA loan only requires a 3 percent down payment. This can make home ownership for the first-time home buyer a much more obtainable goal. Also, the down payment can be a gift from a family member or other source, which often makes the difference between whether home ownership is or is not attainable for many first-time home buyers.
- Easy to qualify. It is easier to qualify for an FHA loan because it is insured by the Federal Housing Administration. This makes FHA loans a better option for those with marred credit. While a first-time home buyer or someone with credit problems may have problems qualifying for a conventional mortgage, the FHA loan qualification process is much easier for these borrowers.
- Low closing costs. Using an FHA-approved lender usually means lower closing costs than a conventional mortgage.
- Lower overall costs. Because the Federal Housing Administration insures the loan, FHA loans typically have good interest rates, which save on the overall cost of the loan.
- Avoiding foreclosure. In the case of unforeseen financial problems, the Federal Housing Administration provides options to help avoid foreclosure for borrowers with FHA loans.
FHA loans have been helping people become homeowners since 1934, so they have a long history of assisting borrowers. However, if you are considering an FHA loan, you should always compare conventional loan products. That is the only way to be sure you have found the best deal for yourself.
Not sure if you may be eligibile for an FHA loan? Check FHA loan eligibility today!