Federal Housing Administration Loan (FHA Loans)
An Ideal Product for First-Time Home Buyers
Whether you are a first-time homebuyer with limited savings, or you need to purchase a home, but you have a lower credit score, the right provider for an FHA loan in Redding, CA, can help you achieve the milestone of becoming a homeowner.
You can use an FHA loan to purchase or refinance a single-family home, two- to four-unit multiunit homes, condos, and certain manufactured and mobile homes. There are also specific types of FHA loans for renovating existing homes or new construction.
How are FHA Home Loans Different From Conventional Loans?
While you can use a conventional loan for the same purpose as an FHA loan, it is easier to qualify for the latter. Conventional loans are not guaranteed or insured by the federal government, unlike FHA mortgage loans.
Here are some of the key differences between these two loans:
- Conventional loans require you to have a good credit score and typically have higher monthly mortgage insurance payments.
- FHA rules are more lenient regarding gifts of down payment money from charitable organizations, employers, or family.
- Conventional loans do not involve closing costs that can be a requirement with FHA loans.
The Pros and Cons of FHA Mortgage Loans
There are several advantages you can get with an FHA loan that make it a more attractive loan product than conventional loans. However, it does come with its drawbacks as well. Here is a better look at some of the benefits and disadvantages of FHA loans.
Benefits of FHA Loans
- Require lower minimum credit scores to qualify.
- Down payments can be as low as 3.5%, making them ideal for first-time homebuyers. You can also use any down payment received as a gift from your family, friends, or employers.
- Allows for debt-to-income ratios as high as 50%.
- It is the only loan option that allows for Down Payment Assistance Programs.
- Through Streamline refinancing, FHA loan borrowers might not require ordering a new appraisal to take advantage of lower rates.
- FHA loans have a significantly lower interest rate than conventional loans.
- It is an assumable loan in which a family member can co-sign the loan if you cannot afford the payment. The co-signer can also leave the loan without the need for refinancing.
Disadvantages of FHA Loans
- The property you purchase using the loan must meet health and safety standards. The minimum property standards can make it challenging to find the right home, which qualifies for the loan.
- The loan amount can never go over the conforming limit for properties in the area. When you are getting an FHA loan in Redding, CA, it is unlikely that you can use it to purchase a property for more than $271,050 for most of the country.
- FHA mortgage insurance lasts the entire term of the loan if you make a down payment of less than 10%. You can avoid the cost by taking out a 15-year loan and putting 10% down, provided that you also pay the upfront mortgage insurance premium.
Get Your FHA Loan in Redding, CA, Through Megastar Financial
Megastar is a trusted provider of FHA loans in Redding, CA. If you are a first-time buyer or someone with lower credit scores and limited savings seeking an ideal loan product to purchase a house you can call home, we can help you achieve that milestone.
Feel free to stop by our office or call us at (530) 999-9000, so our experts can help you find the most suitable loan product to meet your needs.
MEGASTAR FINANCIAL CORP. is an Equal Housing Lender. DBO Lic # 603 G365 NMLS Lic # 235828(3043)*
Licensed by the Department of Business Oversight (DBO) under the California Finance Lenders Act * NMLS # 1162668.
As prohibited by federal law, we do not engage in business practices that discriminate on the basis of race, color, religion, national origin, sex, sexual preference, marital status, age (provided you have the capacity to enter into a binding contract), because all or part of your income may be derived from any public assistance program, or because you have, in good faith, exercised any right under the Consumer Credit Protection Act. We are regulated by the Fair Housing Act (overseen by HUD) and the Equal Credit Opportunity Act (overseen by CFPB), Washington, DC, 20580.
Example of 30 year mortgage:
$300,000 sales price, $60,000 down payment, $240,000 loan amount, 360 months, 3% interest rate, 3.132% APR, $1,029 Principle and Interest monthly payments, Payment does not include taxes, insurance premiums or HOA dues. The actual payment amount will be greater. Rates shown valid on publication date of June 29th, 2020. This example is for a conventional, not jumbo, mortgage product; there are restrictive upper loan amounts for conventional loans based on the property’s location. Example given requires a minimum 740 credit score with a debt to income ratio of under 45%. Applicant must be employed. This is not a promise to lend. All terms and conditions are based on the subject property, the applicant’s credit worthiness and the applicant’s ability to repay the loan.
15-Year Fixed-Rate Mortgage:
The payment on a $300,000 15-year fixed-rate loan at 2.723% and 80% loan-to-value ratio (LTV) is $1,626. The annual percentage rate (APR) is 3.178%. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Rates shown valid on publication date of June 29th, 2020. This example is for a conventional, not jumbo, mortgage product; there are restrictive upper loan amounts for conventional loans based on the property’s location. Example given requires a minimum 740 credit score with a debt to income ratio of under 45%. Applicant must be employed. This is not a promise to lend. All terms and conditions are based on the subject property, the applicant’s credit worthiness and the applicant’s ability to repay the loan.