COULD AN FHA LOAN BE YOUR BEST OPTION?

FHA loans were first originated back in 1934 and over the years have developed into one of the most competitive mortgage programs in today�s market and especially so for first time home buyers. What makes an FHA a good option to finance a home and why do borrowers like them? FHA loans are one of the three primary government-backed mortgages, the other two are VA and USDA loans. VA loans are the best choice for those who qualify and want a zero down loan program and USDA mortgages also provide a zero down option but are limited to certain areas and the borrowers� income cannot exceed specific limits. FHA loans have no such restrictions and can be used by a first time home buyer just as easily as someone buying a retirement home.

While FHA loans don�t have a zero down payment feature they�re awfully close. FHA loans ask for just a down payment of 3.5% of the sales price of the property. On a $250,000 home that�s just $8,750. Compare that amount to a conventional loan that asks for a 20% down payment and you�ll see why the FHA program is so popular.

And even though the down payment is just 3.5%, sometimes buyers need a little extra help with the down payment as well as handling mortgage closing costs. Closing costs are required with FHA loans just as with any mortgage but unlike a conventional loan the down payment as well as all closing costs can be paid for in the form of a financial gift from a family member or qualifying down payment. All the borrowers need is $500 of their own funds in the transaction. Other loans allow for gift funds but sometimes the guidelines for gifts are too onerous as to no longer make it an attractive option.

To top it all off, FHA loans can be found at most every mortgage lender, bank or credit union in the country. That means lenders of all stripes compete for the very same loan program which helps to keep interest rates low. FHA loans may not be the best choice for borrowers who have a large down payment because FHA loans do ask for mortgage insurance but for those who want a low-cost mortgage loan but do not have VA home loan eligibility, the FHA loan program may very well be your best option.

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