If you’re thinking of taking a mortgage out on a property, you’ll want to consider your different lender options. There are different ways you can get a mortgage, and one loan type, known as an FHA loan, is becoming increasingly popular. Understanding FHA loans
What are FHA loans?
An FHA loan, or Federal Housing Administration loan, is a mortgage given out by a lender who’s insured by the FHA. This type of loan is designed for people on lower incomes, helping to make mortgages an option for everyone, and tends to be more flexible than standard homeowners’ loans.
What are the benefits of FHA loans?
Because FHA loans are designed for people on a lower income, you may be able to reap the following benefits from taking an FHA loan out yourself:
1. Lower down payment
With FHA loans, you can often take out a mortgage with a lower down payment – the deposit payment that you’ll have to provide to secure the property – than many standard loans. This makes FHA loans a good option for people who have less upfront cash to put towards a property.
2. Lower credit scores considered
All mortgage lenders will consider your credit score to determine your financial trustworthiness before agreeing to any mortgage terms. If your credit score is low, you’ve got a better chance of being accepted by an FHA loan provider than a standard lender.
3. Your previous credit issues are less of an issue
Just as an FHA lender will take you on if you have a lower credit score, they are also more likely to be lenient if you have previous payment issues on your credit reports. Even if you are unable to qualify for a loan with a standard lender, you may be able to reach an agreement with an FHA lender.
4. Easier to refinance
Although not all FHA lenders work the same, you can generally expect that if you want to change your mortgage terms, the refinancing process will be a lot more straightforward than with a standard lender. You can normally bypass all the paperwork and save yourself a lot of time and hassle.
5. Additional down payment sources
Some people may ask for the help of a friend or a family member to pay off some, or all, of their down payment. If you’re considering doing this, an FHA lender will allow you to use a “gift” payment for the whole of your down payment. This isn’t always the case with standard lenders, who may want you to put forward at least some of the money yourself.
What options do I have?
If you’re considering an FHA loan, there’s plenty of choice when it comes to deciding on a lender. Some are better than others, and some may be more appropriate for you. The only way to make sure you’re getting the best deal is to do your research online, and take a look at comparison marketplaces for specific mortgage types. Checking out the best FHA lenders at Crediful.com is a good place to start.