FHA Loans are popular home financing plans for a variety of reasons. In today’s post, we’ll explore a few of those reasons and explain what makes FHA Loans different from other popular loan products in today’s marketplace. Be sure to review the following points carefully and consult a home loan professional if you have any questions.
Why Consider an FHA Loan?
1.) Government Insured
One of the things that sets them apart from traditional, conventional home loan options is that they are backed by the Federal Housing Administration (FHA). Due to being insured by the Federal Government, FHA Loans allow borrowers a bit more flexibility without adding more risk to the lender.
2.) Low Money Down
FHA Loans allow borrowers to put as little as 3.5% down at closing. With a conventional mortgage, any borrower who makes a down payment less than 20% must pay Private Mortgage Insurance (PMI) until they build 20% equity in their home. Although FHA Loans also require mortgage insurance, the premiums are often a lot less pricey than PMI for conventional mortgages. If you’re considering an FHA Loan vs a Conventional Mortgage, be sure to crunch the numbers and see which loan makes the most sense for your scenario.
Need help? We have free online calculators you can use to estimate and compare costs between two loan options.
3.) Flexible Credit Score Requirements
With and FHA Loan, the borrower doesn’t have to have perfect credit in order to qualify. In fact, borrowers with less-than-perfect FICO scores may find that it is more affordable to go the FHA Loan route instead of with the Conventional Mortgage option. With a Conventional Mortgage, borrowers with lower credit scores may end up paying a higher interest rate than they would if they went with an FHA Loan. Of course, this can vary from lender to lender and borrower to borrower. Speak with a loan professional to request a free FHA Mortgage rate quote and compare it to what you would pay for other types of loans.
4.) Streamline & Cash Out Refinancing
If you choose to refinance your FHA Loan someday, you’ll be glad to know there is a simplified, streamlined refinancing option available to FHA borrowers. With an FHA Streamline Refinance, much of the paperwork and additional costs are waived, saving the homeowner time and money. When you can trim refinancing expenses, it helps make the refinancing process even more worthwhile and may help you see the savings sooner.
Borrowers can also take advantage of higher loan-to-value (LTV) cash out limits when they choose to do a cash out refinance on their FHA Loan. A Cash Out Refinance is when the homeowner refinances the mortgage for more than what they currently owe and receive the difference in cash. There are limits to how much cash the borrower can receive, but with FHA Loans, borrowers can typically enjoy higher limits, giving them access to more of their home’s equity.
5.) Fixed and Adjustable Rate Options Available
Some borrowers prefer to have a fixed interest rate that they know will never change. The predictable, steady mortgage payments help them plan their expenses and eliminate the fear of their rates going up once they reach a certain milestone in their mortgage’s amortization schedule.
Other borrowers may prefer to get a lower introductory rate that is subject to change in the future. This helps the homeowner save money during the first few years of the loan; however, the rate will likely change after a certain point. This option may be more attractive to people who plan to move or refinance within the first 3-5 years.
We’re Here to Help
At Luxury Mortgage, we are glad to offer both fixed and adjustable rate options for our FHA borrowers because we know that what works best for some, may not necessarily be the best choice for all.
Want to learn more about FHA Loans from Luxury Mortgage? Please don’t hesitate to give us a call.
We're dedicated to helping borrowers find the right home loan program for their situation. Contact us today for a free quote and consultation.
Call us today: (888) 379-0303