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Understanding the Pros & Cons of FHA Loans
FHA Loans: Why Home Buyers Should Know
For all its rewards, the process of buying a home can certainly present its share of challenges. One of the biggest challenges is often securing a home loan. If you're a first-time home buyer, have less-than-perfect credit, or haven't been able to save up the recommended 20 percent down payment, our Cressy & Everett REALTORS® want you to know that you still have options.
For many home buyers, an FHA loan is one of the best among those options. It's one of the easiest types of home loans to qualify for, and while you should still not take out a loan without fully thinking out your options, it might be just the opportunity you need to make your dream of homeownership a reality.
Understanding FHA Loans
FHA loans were first introduced to help stimulate the housing industry while allowing more lenders to operate with less financial risk. These loans are backed by the Federal Housing Administration, which essentially protects the lender in case the borrower defaults on payment.
As a result, FHA loans are often some of the easiest loans to secure, although lenders and borrowers must still meet certain requirements. As with any type of home loan, an FHA loan comes with some pros as well as cons.
Pros of FHA Loans
- FHA loans often present a good option for young, first-time home buyers, who may not have had the time to establish a high credit rating or save up enough for a sizable down payment.
- An FHA loan does not require a substantial down payment like most loans do. Buyers can typically put down as little as 3.5 percent of the property's purchase price.
- Many home buyers who would not be able to qualify for a traditional mortgage, including those who have suffered from bankruptcy or foreclosure, may still be able to qualify for an FHA loan.
Cons of FHA Loans
- Due to putting down a smaller down payment than you would with a traditional loan, there is a good chance you will end up paying a higher interest rate with an FHA loan.
- The FHA funding fee includes an upfront premium as well as a monthly mortgage premium, which adds to the overall cost of the mortgage.
- Unlike a conventional loan, which allows you to cancel your mortgage insurance policy once you've gathered enough home equity, taking out an FHA loans means you will have to keep paying monthly mortgage insurance premiums.
To learn more about how you can qualify for a home loan, contact us today. Our team is committed to helping you find your dream home and make it your own.
Note: a subscription to the Do Not Call list does not apply when requesting information from our company.
