Being a homeowner is highly beneficial because it can suit your needs while being an excellent long-term investment. For this reason, all prospective homeowners take their time to seek the perfect home. However, homeownership isn’t a one-and-done process because one must take care of certain things, such as securing the loan. Among the many loans that one can get, one example is FHA home mortgages.
An FHA mortgage is a loan that the Federal Housing Administration insures. This type of loan is available to homebuyers with a lower credit score and a smaller down payment than what’s typically required for conventional loans. Because of this, FHA mortgages are often more attainable for first-time homebuyers and those with less-than-perfect credit. Despite their benefits, however, many refuse to rely on FHA mortgages since certain restrictions remain. For this reason, we’ll highlight several pros when using an FHA mortgage.
The Benefits of FHA Mortgages
When you use an FHA mortgage, you can reap the following benefits:
- Low Down Payment Needed. An FHA mortgage requires a lower down payment than a conventional mortgage does. Most conventional loans require a minimum down payment of 20% of the loan amount, whereas FHA loans require only 3.5%. For example, if you’re taking out a $200,000 loan, you’ll need a minimum down payment of $7,000 with an FHA loan, while you’ll need a minimum down payment of $40,000 with a conventional loan.
- Accessibility to Borrowers with Lower Credit Scores. A credit score is a number that reflects the risk a lender takes when loaning money to a borrower. A lower credit score means a greater risk to a lender and a higher interest rate on the loan. FHA loans have lower credit score requirements than conventional loans because the government backs them. The minimum credit score for an FHA loan is 580, while the minimum credit score for a conventional loan is 620.
- Better Interest Rates. The interest rate is the percentage of the loan amount you pay to the lender as a fee for borrowing the money. An FHA loan has lower interest rates than a conventional loan because the government backs it. FHA loans are available for fixed-rate and adjustable-rate mortgages, so borrowers can select the type of loan that best meets their needs.
Should You Get an FHA Loan?
Now that you know more about FHA loans, you might wonder whether they are right for you. Here are some things to consider before you make your decision:
- Do you have a low credit score?
- Do you have a limited amount of money to put down?
- Do you have limited funds for closing costs?
- Do you have a stable income?
If you answered “yes” to these questions, you might be a good candidate for an FHA loan. If you answered “no” to any of these questions or are unsure, you should talk to a mortgage specialist to know if it’s right for you.
Conclusion
FHA mortgages are one of the most popular home loan options for first-time and repeat home buyers. The program’s low down payment requirements, lenient credit standards, and competitive interest rates make it an excellent choice for many prospective homebuyers, so it’s always a worthwhile consideration. All that matters is finding the right mortgage product for your unique circumstances.
Get in Touch With a Reliable Mortgage Expert in Royal Oak, MI
If you need help with buying a home in Michigan, Mortgage City can help you! In addition to Michigan, we are licensed in multiple states, including Florida and New Hampshire, so we can help you get the best deal on your dream home for fair prices. Contact us today at (248) 930-8709 and allow us to help you!
