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FHA loans have been helping people become homeowners since 1934. Some benefits of FHA loans are:
A Federal Housing Authority (FHA) loan allows a buyer the opportunity to purchase a home with a very low down payment and some of the lowest interest rates in the industry, and in certain circumstances, most or all of your of your closing costs and fees can be included in the loan. Available on 1-4 unit properties. They tend to be more lenient on areas such as credit, funds to close and coborrowers.
Most loans use a method of analyzing credit called credit scoring in the underwriting process. Studies have demonstrated a direct relationship between low credit scores and higher mortgage delinquency rates. As a result many lenders have established minimum credit scores at which they will accept loans. Unfortunately, a lack of credit, old delinquencies or incorrect information on the credit report can cause a low credit score. FHA does not have specific credit score requirements. Although a high credit score may assist in getting the mortgage approved, a low score is not automatically cause for denial. If the credit scores are low, then it is up to the borrower to demonstrate his/her ability and willingness to pay the loan back. This allows the borrower to explain the circumstances surrounding the credit difficulties and have that explanation considered in the underwriting process.
The underwriter on an FHA loan will review the credit and payment history of a customer concentrating on the most recent 12 to 24 months. If the customer has had a good payment record over the past 12 to 24 months they can often get approved for a mortgage even when Conventional financing has turned them down. An experienced loan officer can help the customer clearly tell their story and will often make suggestions as to how to make the file more acceptable to FHA. Because of FHA's leniency, some borrowers with past credit problems elect to use FHA for loans when they have a substantial down payment rather than getting a higher interest rate conventional loan. FHA tends to be more flexible than Conventional financing in the money needed to purchase the home.
An FHA mortgage allows the borrower to use their own funds or "gift" funds from a family member for the low down payment. The down payment amount is a percentage of the sales price of the home. Keep in mind, however, that the total cost to close on an FHA loan is commonly more than only the down payment. With the down payment, closing costs, money to establish escrows for taxes and insurance plus interest to finish out the month of closing, the total costs can be closer to 6 or 8% of the sales price.
The interest rate that you select will also have a bearing on the total costs. If you select a lower rate so that you can reduce your payment, you may end up paying additional funds for "discount or origination fees". At the same time if you are comfortable with a slightly higher payment you may find a lender that is willing to reduce the costs to close in favor of a higher interest rate.
FHA allows the borrower to get the funds necessary to close from several sources. They include such areas as personal savings, gifts, grants, loans from retirement accounts and seller contributions. An FHA loan can be more complicated than a traditional mortgage, so call or email Fred to find the program that best fits your needs.Apply
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