The FHA has helped millions of Americans achieve their dream of home ownership since its inception in 1934. Seventy-five years later, there’s no better time than now to capitalize on the benefits of an FHA loan.
FHA loans provide prospective home buyers with an array of benefits and low-cost opportunities. Their financial flexibility is almost unmatched in the industry. FHA loan requirements have long been favorable to first-time home buyers and those with low to middle incomes. But there’s been a recent surge in FHA loans – the agency set a new monthly record in June after guaranteeing almost 186,000 mortgages.
Millions of Americans are eligible for FHA loans. There are no income restrictions or credit score requirements, meaning home buyers don’t need perfect credit. Even those who have experienced bankruptcy or foreclosure can still qualify for an FHA loan. The agency will examine a potential borrower’s financial and credit history, including employment status, available capital and several other key indicators.
FHA loans come with considerably lower down payments than conventional loans – about 3 percent is all that’s required. Some borrowers can actually reduce their down payment to zero by combining an FHA loan with other specialized loans. There is a closing cost of 2.25 percent, and monthly payments must be about a third of a borrower’s income.
FHA loans make even better sense today because of the federal government’s $8,000 first-time home buyer’s tax credit. Buyers can use the tax credit to help cover a down payment or closing costs. Those who have not bought a home in three years are considered “first-time” buyers, but individuals who make more than $75,000 a year are not eligible.
Beyond the $8,000 tax credit, FHA loans generally come with lower closing costs and more competitive rates than conventional loans. Prospective buyers can use an FHA mortgage loan to buy a condominium, a single-family house or up to four-unit buildings, provided the buyer is living in one of them. There are also unique FHA loans that allow borrowers to buy and then fix up a rehab property.
FHA borrowers can prepay on their loan or refinance at any time without taking a financial hit. But they do have to work with a price cap. The FHA has loan limits that vary by state. Currently, the limit ranges from $271,050 to a maximum of $729,050 in high-cost parts of the country, such as California and New York.
Submitted by:
Brandon Laughridge
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