FHA mortgage loans have been helping ordinary people become homeowners since their inception in 1934. Subject to a limit of $625,500, the maximum home mortgage is currently set at 115% of the median property price in the local area. Although the loan is funded by the bank or financial institution in the same way, it is insured by the U.S. Department of Housing and Urban Development (HUD). This type of mortgage is only available for single family homes, one to four family homes, condominium units or a manufactured home that is on a permanent foundation.
FHA Mortgage Loans – Home Buying Help Through a Low Mortgage Down Payment
Due to the risk of negative equity and/or mortgage foreclosure, the majority of conventional home mortgages require a house deposit of 20%. However, a first-time house buyer can provide a mortgage down payment of just 3.5% when the loan is underwritten by HUD. This is because the risk is covered by the insurance, not the lender. The provision of a sufficient deposit is a major stumbling block so this feature is a major source of home buying help.
Mortgage for First Time Buyers – Home Buying Help for Poor Credit History Applicants
It may still be possible to become a homeowner when bad credit is an issue. Whilst a FICO credit score rating remains an important criteria, an FHA mortgage loan may be available to those who have missed and late payments. They will generally look for at least two reliable lines of credit, such as the cell phone or utility bill. Even someone who has filed chapter 7 bankruptcy may still be eligible, provided that they were discharged at least two years ago. Those with delinquent student loans and tax liens aren’t eligible.
Competitive Interest rate on FHA Mortgage Loans – An Affordable Mortgage for First Time Buyers
Whilst a poor credit history is a major determinant, the rate of interest will only be marginally higher than it is on a conventional mortgage. This is the case despite the fact that the house deposit provided is generally a lot lower. It is possible to take out a fixed rate mortgage or a graduated mortgage for those who are likely to experience income growth over the course of their professional life.
FHA Mortgage Loans – Higher Debt to Income Ratio is Allowed
Whilst most lenders will not offer a mortgage for first time buyers where the borrower’s debt to income ratio is above 36%, this isn’t the case here. The figure can be up to 43%. It may also be possible to determine the mortgage payment as a percentage of untaxed income – this can be up to 31%. The different variations can provide home buying help, especially if some figures appear more favorable.
FHA mortgage loans provide a foot on the property ladder for those who wouldn’t otherwise qualify. Whilst the provision of an upfront insurance premium of 1.75%, this is a price that is well worth paying. When all costs are factored in, it could be possible to get approval with savings of just over 5% of the properties value.