Federal Housing Administration (FHA) mortgage loans are specially designed to allow low- to moderate-income home buyers to afford a house. This mortgage loan requires a lower down payment and has a more lenient credit score requirement. More often than not, this mortgage loan is the ideal option for homebuyers who do not qualify for “traditional” mortgages.
The Pros of FHA Home Loan
The ultimate reason why FHA mortgages are attractive to many buyers is that it’s easier to get approved for an FHA loan. You can be approved for such a loan as long as you have the following requirements:
- A decent credit score (not less than 600)
- Able to afford a 3.5 percent down payment
Just these reasons attract more applicants compared to traditional mortgages, which require a credit score of 700 plus and requiring as much as 20 percent downpayment.
The Cons of FHA Home Loan
Some borrowers avoid FHA loan for a couple of reasons, such as the following:
- Not ready to commit to a mortgage. A 3.5 percent downpayment may be a small amount, but this could also mean you are not yet standing on solid financial ground. Is it worth-considering less expensive homes or waiting until you can afford a larger down payment? Keep in mind that the more you borrow, the more interest you will be charged, making your home significantly more expensive with an FHA loan.
Is FHA Loan Right for You?
FHA mortgage loan is beneficial if you have at least 3.5 percent for downpayment and a credit score of 600 above. If you meet these requirements, consider securing the following to determine whether an FHA loan is your best bet.
- Low debt-to-income ratio. This means that your monthly student loan, credit card payments, and car loan should only take up 15 percent or less of your monthly income.
- An emergency fund in addition to your down payment. Buying a home comes with potential unexpected expenses. Plus, if you lose your job, you won’t have enough money to pay for your monthly mortgage payment.
Where to From Here?
Not all lenders offer FHA home loans, so you will need to find brokers or banks in your area that offer them. Mortgages can get complicated, and checking out several choices can save you money, so make sure not to rush in.
The smartest thing you can do from here is to contact a certified mortgage broker like Greg Hayden to help you compare mortgages in South Florida. Greg Hayden of Mortgages Done Right can help you find the best deal for your needs and make you feel that homeownership is a privilege, not a luxury. If you’re ready to buy a home, call us today, and we’ll help you get the house of your dreams!