Benefits In A Fha Mortgage Loan
One of the home programs you can choose from is a FHA home loan
. 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 mortgage. Below are the many benefits to the FHA program.
Lower Down Payment
A FHA mortgage loan offers buyers a program with a lower down payment. The current minimum down payment for a FHA mortgage 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 home loan program helps buyers purchase their new home.
Seller Concessions
FHA loans also allow the seller to contribute up to 3% towards buyers closing cost. This is extremely important in assisting a homebuyer purchase a new house and reducing the amount of funds 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 $100,000, the seller can contribute $3000 towards the buyers closing cost.
Lower Loan Rates
For many buyers, FHA home mortgage loans offer the most competitive rates. FHA mortgage rates are not tied to credit scores like the way conventional home loan rates are. For example, if a person has a credit score of 660, the FHA mortgage 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 home loan program is the approval of mortgage insurance. FHA home loan mortgage insurance is approved as long as the home mortgage loan is approved. This is not the same when it comes to a conventional home mortgage loan. Many times, a borrower can be approved for a conventional home mortgage loan, but will not be approved for mortgage insurance. This results in the denial of the home loan, but with a FHA mortgage, as long as the loan is approved, mortgage insurance is approved. Also, the monthly mortgage insurance payment for a FHA mortgage loan is usually less than the private mortgage insurance offered on conventional mortgages.
Mortgage Size Limits
FHA loans do have set loan limits that are established by HUD. To determine the loan limit in your area, contact your mortgage consultant. 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 home mortgage loan 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 homeowner to refinance with limited paperwork. Though, it might be in the best interest of the homeowner to consider a full refinance over a streamline. Consult a mortgage advisor to see which program is best for you!
FHA home loans are a great way to refinance or purchase a home. It is always important to understand the benefits of each home mortgage loan program that you qualify for and to make sure you are getting the best possible home loan.
by: David White
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