How FHA Loans Work

If you are looking to buy a new house, you’ve probably come across FHA Loans and are curious to know how they work. In 1934 the Federal Housing Administration created a loan program that was designed to help homeowners who couldn’t afford a conventional loan or were having trouble making payments. Since it started, the FHA loan program has helped millions of Americans realize the dream of homeownership. They have done that by offering American families a number of huge benefits.

Low Down Payment

When you apply for a conventional loan, you might be expected to pay as much as 20% for the down payment on the house. As you could imagine, this gets expensive very fast. With an FHA Loan, you have the option of financing up to 96.5% of the total cost of the house, which means you are only responsible for paying 3.5% down.

No Insurance Premiums

The FHA does not actually issue the money itself; rather, they insure your loan for you. This means you won’t be required to pay for any additional private monthly mortgage insurance.

Low Interest Rates

As a Federally-insured borrower, you are very secure to lend money to. As a result, private lenders will often be willing to give you a competitive interest rate. This rate could even be below the current mortgage market rate in some instances.

Avoid Foreclosure

The FHA has created programs designed to help families make their payments. The FHA benefits from you keeping your home, so they will do everything they can to ensure that happens for you.

Where to Start

If you are interested in obtaining an FHA Loan, make sure you go through a lender who is approved by the FHA. This lender can be a bank, savings & loans association or a mortgage company. The lender you choose will be able to help guide you through all the necessary steps to achieve your affordable FHA Loan. Keep in mind that even though qualification is easier than with a conventional loan, you will still need to provide credit scores and financial information.

Before you start shopping for houses, it’s a good idea to get pre-approved for a loan. This way you will know if you meet the requirements for an FHA Loan, and you’ll be able to see just how much you can borrow. Take minute to fill out our secure online form to get pre-qualified today!

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