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Fha Loans
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FHA stands for Federal Housing Administration. The FHA has a number of options that can be used by people who want to own a home. These loans are mortgages given out by the FHA. With a small amount of down payment it is easy for the lenders to obtain an Fha loans. These loans are easy to qualify for but are not meant for everyone.
Let us what exactly are Fha loans. FHA guarantees these loans so that in case the borrower defaults on the loan the lender would not have to write off the loan. In such cases the FHA would be liable to make the payment. This is the reason why lenders agree to give out loans.
FHA loan can be obtained by anyone and added to this there is no income limit attached to these loans. But definitely there is a limit to the amount that you can borrow. The limits are determined according to the price of houses in your area. For knowing the limit of the FHA loan in your area you can log on to the HUD website and get more information. For getting an FHA loan you are required to have a practical debt to income ratio. Besides this you are also required to have a reasonable credit score. For getting an FHA loan you dont need to have a flawless credit report.
However not everybody qualifies for the FHA loans. On the same hand these loans serve as a great relief to some borrowers. With the help of FHA loans people can buy a house with a small down payment as small as 3% whereas with other loans you would have to pay more down payment.
With the FHA loans the FHA pledges to pay the lender in case the borrower defaults on the loan. But it is not as simple as it seems the borrower is supposed to pay a fees to the FHA. People who take an Fha loans would have to pay 1.5% as the upfront mortgage insurance premium. Besides this the borrower also has to pay some amount as the ongoing fee along with the monthly payments. Now when the borrower defaults on the payments the FHA would use these insurance premiums to pay off the loan.
The FHA loans are quite flexible but still before you apply for any of these loans you should go through the factors so that you would know whether to apply for these loans or not. In order to qualify for an FHA loan the person is required have a full time employment and should be employed for the past two years. It would be a bonus point if the person has been employed with the same employer for the two years. Those people who have been changing their job frequently would have a tough time getting these loans. But if the change of job would have been due to some genuine reason like illness, layoff legal excuse etc. then the case can be considered.
When the FHA loan is under processing the lender typically looks at the credit
transactions that taken place for the last two to three years. In case of a late payment on the credit report the borrower cannot have a late payment exceeding 30 days for the past two years. If there is a bankruptcy on the credit report then it should have been discharged two years back. The foreclosure if any should be at least three years old. Both in case of a bankruptcy or a foreclosure the lender would like to assure whether the borrower has started establishing credit or not.
The lender would also assess your household income so that your payment towards the loan does not exceed the 30% barrier. But the FHA is a bit flexible in these concerns and because of the hike in prices for houses the lender may also approve the loan even if the loan is beyond 30%.
There are times when people feel that the Fha loans are not for them. Incase people need a large amount of money then FHA loans are not for them. In addition at times the upfront mortgage insurance premiums are costlier than the private mortgage insurance. There are instances where people can use the standard loans to buy the house. If you have good searching skills then you can easily get an offer better than the FHA loans. Before you take an FHA loan you should compare the other offers also.
With the help of FHA loans the consumers can also have refinancing options. With an FHA loan the borrowers get a lower interest rate than any other conventional loan. This can help you save a lot of money. The down payment that is required for these loans is lower as compared to the other loans and the closing cost of the loans can also be financed with the help of the mortgage. Moreover the fee with the FHA loan is restricted and does not exceed 1% of the mortgage amount that you are taking.
Reputed financial institutions give out the FHA loans and many lenders are authorized to give out these loans. But when you take an FHA loan like any other loan you should compare the cost of these loans also. When the FHA authorizes an institution it does not mean that they would have the lowest interest rates. When you look for FHA loans you can easily find the rates of these loan online. This means that you can search for rates without damaging your credit. Other Articles |
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