If you're in the market to buy a new house then you will more than likely need a loan. There are multiple types of loans available to you, but we will be discussing one in particular, an FHA loan. This week's blog gives an overview of an FHA loan and talks about what it means to you. When a mortgage is secured through FHA (Federal Housing Administration) the loan is insured from default by the government. What this means is the FHA guarantees to pay lenders if the borrower defaults on their loan. This guarantee allows lenders like us to make available a wider variety of loans to our clients. To be able to insure this loan, the FHA charges a fee. Borrowers who use FHA loans pay a mortgage insurance premium (MIP) of 1.75% upfront. In addition to that, they pay a substantial fee included with each monthly payment.
The Federal Housing Administration offers several programs to promote home ownership. One advantage of this type of loan is normally a smaller down payment to buy a home. People who might otherwise not qualify for conventional loans can qualify for an FHA loan because the qualification ratios are more lenient for FHA loans and FHA guidelines make it easier for people to qualify for a mortgage, but there are some disadvantages. FHA mortgage insurance has become extremely expensive recently and is a very large negative factor regarding getting an FHA loan. If you can meet the more rigid requirements of a conventional loan, this is usually the best option.
We offer multiple loans at Intercoastal Mortgage Company, FHA loans being one of them. As you have read there are advantages and certain disadvantages to these types of loans. If you would like to go over which type of loan would best fit your situation, then contact me and we will go over the differences with you and get you into the home you desire.
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