In your search for the perfect place, you may have found homes in your market that are a bit out of your price range. Or, you may have found that you don’t have the traditional 20% down payment to buy a home.
If you feel that you don’t have enough cash to close or that you have a less-than-perfect credit score, an FHA loan may be the answer to your homeownership dreams.
What is an FHA Loan?
An FHA loan is a type of mortgage that you can use for either a home purchase, a refinance, or a renovation. It’s named after the Federal Housing Administration (FHA), a government agency set up to help Americans achieve their goal of homeownership.
The FHA insures the loan, making it a government-backed loan that lenders are more easily able to work with because the criteria are flexible.
Compared to conventional loans, the FHA loan program is less strict about credit and down payment requirements. This combination makes FHA loans a solid option to consider when thinking about homeownership and other home finance goals.
How an FHA Loan Can Help You Improve Your Overall Financial Picture
One of the overlooked aspects of an FHA loan is how it can help homeowners get on the road to better general financial health, improving their lives and their communities as a result.
Here are some of the ways an FHA loan can give you the leverage you need to improve your overall financial picture.
- Low down payment means more money to use – The FHA loan requires a down payment of anywhere between 3.5-5% of the overall home price, while many conventional loans require at least 10%. This difference can mean thousands of dollars saved or used for a variety of other things.
- More allowance for gifts – The FHA loan allows a larger part of the down payment to be paid with money from other sources as compared to conventional loans. This means that a borrower can use less of their own money for the down payment and again, redirect that money to other purposes or save it.
- An affordable renovation – Using an FHA 203(k) loan, a borrower can turn a less-than-perfect home into a picture-perfect residence. This renovation loan option offers the same flexible requirements as an FHA purchase loan.
- Sellers can help with closing costs – The FHA loan allows sellers to help out more with closing costs than with a traditional conventional loan. This gives borrowers even more support with securing a home that they love.
The FHA Loan: An Affordable Path Forward for Homeownership
The FHA loan program is a great choice for homebuyers who have less-than-perfect credit and less cash to close than would otherwise be needed. The lenient requirements not only allow homeowners to use a small down payment to purchase a home, but greater money for that down payment from outside sources.
The road to homeownership can be a bit rocky, but an FHA loan can help make it that much smoother.
If you want to get started on your homeownership journey fill out the form below and a Mortgage Loan Originator will reach out to you shortly.