There are several government mortgage loan programs that can be highly beneficial to certain borrowers, and a great example here is the FHA loan. This loan type, one often used by first-time homebuyers to help them enter the market, comes with certain relaxed financial and credit restrictions that benefit a number of buyers.
At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to provide a wide range of loans for first-time homebuyers, including FHA loans and many others. What is an FHA loan, why is it so beneficial for many homebuyers, and what should you be thinking about if you’re considering one? Here’s a simple rundown.
What is an FHA Loan?
Backed by the Federal Housing Administration, FHA loans are available to borrowers with credit scores as low as 580 and down payments as low as 3.5% of the home value. Because the government is backing the loan, lenders are able to offer more relaxed qualification requirements for these loans.
Essentially, the FHA is insuring mortgages that are listed by various lenders, such as Altius Mortgage. This government backing means that if a borrower defaults on their loan, the FHA will reimburse the lender.
Why are FHA Loans So Beneficial?
For many borrowers, the key benefit of an FHA loan is the relaxed credit standards. If you have a low credit score or don’t have a long credit history, you may still be able to qualify for an FHA loan.
Another great benefit is the low down payment requirement. With an FHA loan, you can put as little as 3.5% down on a home (as long as it’s within the FHA loan limit for your area). This can make homeownership much more attainable for many people.
Finally, limitations on gifts, family assistance or even employer-based down payment assistance are much more relaxed with FHA loans. This can be a great help if you don’t have the full down payment saved up but do have family or friends who are willing to help you out.
What to Keep in Mind When Considering an FHA Loan
There are a few things you should know about FHA loans before you apply. First, there is an upfront mortgage insurance premium (MIP) that you’ll be required to pay. The amount of the premium will depend on your loan amount and down payment, but it can be as high as 3.5% of the loan. There may also be an annual premium here.
In addition, there could be other closing costs associated with an FHA loan. These may include things like appraisal fees, title insurance, and more. Be sure to ask your lender about these so you can be prepared.
Altius Mortgage and our partners with Mortgage Ogden are happy to help with any questions you have about FHA loans or any other type of loan. Give us a call today to learn more!
For more on this, check out our other resources on FHA loans here: