When you’re in the market for a mortgage loan product, you might consider what a Federal Housing Administration (FHA) loan offers. These loans have special terms and are popular among first-time homebuyers with minimal savings or lower credit scores. Without further ado, here are the benefits of applying for an FHA loan.
7 Key Benefits of FHA Loans
- It Requires Minimum Down Payments. FHA loans require a minimum down payment of 3.5 percent of the purchase price. However, you may need to buy mortgage insurance if your down payment is less than this. That’s because the Federal Housing Administration insures FHA loans. The government supports these loans, allowing them to have generous terms with less money.
- It Requires a Low Credit Score. FHA requires you to qualify for a credit score of 580 or higher. This makes it a good option for buyers with lower credit scores. You can still qualify for an FHA loan with a credit score as low as 500. And one year after you receive your FHA loan, you can apply to refinance with a standard mortgage loan.
- It Has a Flexible Down Payment Structure. With FHA loans, you can make a down payment that’s a gift or a grant from a family member or government programs. You can also get assistance from a nonprofit organization. Such assistance can be a great way to purchase a home. However, such assistance will most likely require a co-signer.
- It Requires a More Thorough Evaluation of the Property. FHA loans have more stringent property standards than conventional loans. They also require more information upfront. This includes interior and exterior property inspections. It also has a review of the property’s title, a documentary checklist, and evidence that the borrower can repay the loan.
- It’s Easy to Refinance. One of the benefits of an FHA loan is the ability to refinance. This is a great way to pay off the loan faster and is available after the first year. The FHA allows you to refinance a home loan within one year of it being obtained. It also allows you to refinance multiple times.
- It Includes Fixed and Adjustable Rates. FHA loans have both fixed and adjustable rates. The rates are lower than a conventional loan, making this a good option if you’re on a budget. The interest rates vary based on the duration of the loan. You’ll get the best rates if you choose an FHA loan with a term of fewer than 15 years.
- It Has a Low Mortgage Interest Rate. An FHA loan has a lower mortgage interest rate than a conventional loan. This is because the Federal Housing Administration insures the loan. This means that it has a lower risk than a conventional loan. It’s also a part of the Department of Housing and Urban Development, which has a reputation for being reliable.
Your Mortgage Team at MidAmerica Bank
FHA loans are one of the most popular loan options for first-time homebuyers. They offer generous terms and can be used to purchase a home with a low down payment. The FHA loans are insured by the Federal Housing Administration, which means that it has a less risky profile than a conventional loan.
MidAmerica Bancorp, Inc. offers a range of mortgages for first-time and returning homebuyers with low down payment options. We service clients in Oak Lawn, Burbank, Hickory Hills, and Chicago, and are licensed in the states of Illinois, Indiana, Wisconsin, and Florida. If you need a housing loan in Chicago, we can help. Call us at (708) 237-4050 to review your home loan options!