Buying a home is a momentous milestone that may seem out of reach based on your financial situation. However, an FHA loan can help manage the cost. So, how can FHA loans impact the cost of a home? With lower rates and significantly lower down payment, it can make the home buying process more feasible and realistic—which is especially exciting for individuals currently in the market for a new house. If you are on the house hunt and interested in learning how to reduce the cost of your dream home, continue reading.
How does an FHA loan affect the cost of your future home?
To drive into further detail, an FHA loan stands for federal housing administration loan, and it’s a federally backed mortgage option for potential or new homeowners. Anyone with a minimum credit score of 500 may qualify. However, these loans are also fantastic for lower-income families and individuals as well. The majority of people cannot pay out of pocket on such a large ticket item, but an FHA loan can help ease the financial burden. Unlike conventional loans, an FHA loan is eligible for streamline financing and will have you paying lower interest fees.
How does it work?
It’s commonly believed that you receive your loan through the Federal Housing Administration. But that is not the case, despite its name. Though the FHA does approve the bank you go through, they do not issue the loan themselves. They only insure it. Though a little bit of extra paperwork is required when filing for the mortgage, new homeowners can benefit greatly from the loan. Lenders can expect a down payment as low as 3.5% along with other perks that cater to their financial situation. They also have the option to sign with a non-occupant co-lender to help qualify if they do not meet the minimum requirements.
What are some benefits of FHA loans?
Anyone can apply. Even if your credit score is on the lower end of the spectrum. However, 500 is required as the minimum. You can also borrow up to 96% of what your home is worth. While still paying a lower and more manageable down payment to secure the property. All in all, it makes purchasing a home more affordable in case you’ve never gone through the home buying process.
Anything is possible
Everyone deserves a roof over their heads and a nice place to call home. The housing market can be unpredictable, and this thought alone can be discouraging. Not to mention that the cost of living is on a steady rise. It has increased by 30% within the last few years. However, if it’s a helping hand you seek as a new or prospective homeowner, FHA loans may help make your dream a reality.
If you’re embarking on the home buying process for the first time, it’s important to know what you can feasibly afford. Understanding your mortgage options and the terms of your mortgage will give you the freedom and knowledge you need. For more information, contact us today.