FHA mortgages for first-time home buyers
2/13/2014 3:59:55 PM
Buying a home is largely considered to be part of the American Dream. Since 1934, the Federal Housing Administration has helped Americans achieve that dream by providing low-rate mortgages. There are many options in the housing market for mortgages, from long and short terms to fixed and adjustable rates. First-time home buyers often face the most difficulties purchasing a home, especially in a competitive housing market. Fortunately, FHA mortgages provide buyers with another option that may help Americans become homeowners.
The down payment
One of the biggest obstacles for first-time home buyers is the down payment. Depending on what type of mortgage you apply for, a down payment can run as high as 20 percent of the value of the home. For a lot of Americans just starting out as a homeowner, that rate is too high. FHA mortgages don't require the same high percentage rates, making them much more affordable for first-time home buyers who might not have enough saved for other loan types. This allows buyers to get more house for their buck. The down payment for an FHA mortgage runs as low as 3.5 percent.
One of the biggest obstacles for first-time home buyers is the down payment. Depending on what type of mortgage you apply for, a down payment can run as high as 20 percent of the value of the home. For a lot of Americans just starting out as a homeowner, that rate is too high. FHA mortgages don't require the same high percentage rates, making them much more affordable for first-time home buyers who might not have enough saved for other loan types. This allows buyers to get more house for their buck. The down payment for an FHA mortgage runs as low as 3.5 percent.
Mortgage insurance
With a lower down payment, there is more risk for lenders that approve the loan. Because of this, homeowners usually need to purchase mortgage insurance, which will provide lenders with some protection if the loan is not repaid. This is an added cost on top of the principal and interest of the loan. However, for a lot of buyers, the additional expense can be added to monthly mortgage payments and is generally affordable.
With a lower down payment, there is more risk for lenders that approve the loan. Because of this, homeowners usually need to purchase mortgage insurance, which will provide lenders with some protection if the loan is not repaid. This is an added cost on top of the principal and interest of the loan. However, for a lot of buyers, the additional expense can be added to monthly mortgage payments and is generally affordable.
Credit rating
Credit ratings are used most frequently by lenders to examine what type of borrower a potential homeowner is. Are bills paid on time? Is there a lot of outstanding debt? Credit scores are often a good indicator for how well someone is able to pay back a loan. As a result, those with excellent or good credit scores will usually end up with the best mortgage terms and lowest interest rates. Borrowers with less-than-perfect credit may find that they are not qualified for certain types of home loans. Fortunately, FHA mortgages typically require a lower standard for credit ratings, making them a better option for those with lower credit scores. However, it is still important to maintain a good credit rating and provide a lender all your financial information.
Credit ratings are used most frequently by lenders to examine what type of borrower a potential homeowner is. Are bills paid on time? Is there a lot of outstanding debt? Credit scores are often a good indicator for how well someone is able to pay back a loan. As a result, those with excellent or good credit scores will usually end up with the best mortgage terms and lowest interest rates. Borrowers with less-than-perfect credit may find that they are not qualified for certain types of home loans. Fortunately, FHA mortgages typically require a lower standard for credit ratings, making them a better option for those with lower credit scores. However, it is still important to maintain a good credit rating and provide a lender all your financial information.
Contact the Federal Savings Bank, a veteran owned bank, to explore the best mortgage rates.
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