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FHA mortgages are a popular option for first-time home buyers to consider. These loans offer attractive terms, including the ability to make smaller down payments and a some flexibility when it comes to credit and income requirements. If you are a first time home buyer it may be a good idea to look into a loan like this for your home purchase, as long as you can meet the qualification requirements.
What is an FHA Loan?
FHA stands for Federal Housing Administration. The FHA insures certain loans with the intention of making it easier for people who would not otherwise qualify for a home loan to do so.
Essentially the government guarantees lenders that they will be repaid for the loan even if you fail to do so. This makes lending the large amount of money it takes to purchase a home, more attractive to lenders who would otherwise be unwilling to take the risk on the bulk of the population.
Not all homes are eligible for FHA mortgages. In fact, in order for the home to quality the buyer must live in the home. You cannot use FHA loans to buy a home as an investment property and rent it out to others – or to buy a vacation home. FHA loans are available for homes that are detached, semi-detached, row houses, condos, and townhouses.
Borrowers who receive FHA loans must also purchase mortgage insurance. You have a few options available for doing this. You can choose any of the following:
Finally, you must have the home appraised by an FHA-approved appraiser and the home must be deemed to meet certain conditions in order to qualify for an FHA loan. These conditions are generally related to the home’s structural soundness and value.
What are the Key Features of FHA Loans?
There are several ways the FHA makes the home buying process easier for the average person, including those listed below.
These features are attractive to potential home buyers, but are not the only reason people turn to FHA loans.
How do You Qualify for an FHA Mortgage?
While the credit score requirements aren’t as insurmountable with FHA loans as they are with other types of loans, that doesn’t mean that there are no real requirements. In fact, the FHA has some pretty stringent requirements for approval including those listed below.
Once all of the pieces fall into place, an FHA loan can be a great option if you’re considering purchasing a first home – for all these reasons and more.