Are You a First-Time Homebuyer? Consider FHA Loans

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Most first-time homebuyers explore all potential mortgage offerings especially if they do not have an established credit score yet. The FHA loan is one of the popular choices because it is a type of mortgage that is insured by the Federal Housing Administration. With as little as 3.5% down payment for 580+ credit scores, a borrower can qualify for an FHA loan in Chandler.

There are strict guidelines for loan approvals, such as higher interest for borrowers with lower credit scores and the need to pay mortgage premiums to protect lenders in case a borrower defaults payment of loans. Recently though, the agency has implemented more practical and reasonable standards. So, it has become easier for buyers to apply for a mortgage for their home purchase.

The FHA Process

The FHA does not guarantee borrower loans or give the actual loans. The FHA program was created to respond to the influx of foreclosures and defaults in the early 1900s. The government needed to provide lenders with sufficient coverage and at the same time, stimulate the housing market with affordable and accessible loans, especially for homebuyers with poor credit scores.

The FHA then ensures lenders and covers the risks that they may face as they lend the money to homebuyers. But even if a borrower fails to get an approval from the FHA, the lender may still accept and process the loan application, thereby underwriting and finalizing it.

FHA Loan Limits

Couple talking to an agent

Over the years, FHA financing has increased the maximum limits for housing loan applications. Their maximum mortgage changed based on surrounding housing market prices. So, even if you intend to purchase a property in expensive areas, you can still get an FHA loan with maximum mortgage offerings.

Additionally, borrowers with poor credit ratings may find hope in getting a mortgage and still buy their dream home. FHA accepts applications from borrowers with credit scores that are much lower than what is acceptable for usual mortgages.

Even business owners who have previously declared bankruptcy but have reestablished their credit may get new properties with FHA loans. This is a welcome development since people who are working hard to turn their lives around now have a second chance at owning a house or property.

FHA Loan Rates and Terms

FHA loan terms and conditions are very simple to understand and calculate. Compared with conventional loans, FHA does not have loan level price adjustments, so this is beneficial to most borrowers. One of the best terms for applicants is that borrowers only need to make a 3.5% down payment. Sellers are also allowed to pay closing costs so that buyers can get a home without using their own money.

FHA loans were not as popular many years ago when they had stringent rules, which were not favored by home sellers and realtors. These days, however, more practical and reasonable standards are being implemented. First-time buyers with limited cash and low credit ratings should seriously consider getting an FHA loan for their home purchase.

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