By JUDY THORPE
During these economically challenging times, more community banks are offering mortgages insured by the Federal Housing Administration.
An FHA loan is a federal assistance mortgage loan insured that can be issued by federally qualified lenders.
There are lots of good reasons to choose an FHA-insured loan, especially if you’re a first-time homebuyer, you don’t have a lot of money to put down on a house, you want to keep your payments low, you’re worried about payments going up, you’re worried about qualifying for a loan, or you don’t have perfect credit.
FHA loans have historically allowed customers to borrow money for the purchase of a home that they would not otherwise be able to afford. The program originated during the Great Depression, when the number of foreclosures and defaults rose sharply.
Because FHA loans are backed by the government, borrowers may have greater flexibility when using FHA financing. Benefits associated with obtaining an FHA mortgage include:
– Current and temporary FHA loan limits range from $271,050 to $729,750.
– Lower down payment requirements.
– More flexible total debt and housing debt to income ratios.
– No reserve requirements for single-unit properties.
– Lower monthly mortgage insurance premiums.
– No minimum or credit score needed. You don’t have to have perfect credit to get an FHA-insured mortgage. In fact, even if you have had credit problems, it’s easier for you to qualify for an FHA-insured loan than a conventional loan.
– Lenders may be more willing to give you loan terms that make it easier for you to qualify.
– Third parties can pay for closing costs, prepaids and escrow.
– Non-occupant, co-borrowers are permitted.
– FHA-insured loans have competitive interest rates.
– Should you encounter hard times after buying your home, the FHA has options to keep you in your home.
To be clear, FHA insures loans for lenders against defaults, it does not lend money or set interest rates. For the best interest rate and terms on a mortgage, you should compare mortgages from several different lenders.
Judy Thorpe is a senior vice president with American Marine Bank.
