When scavenging the market for a new mortgage, it’s essential to understand all of your options. One popular choice among first-time homebuyers is FHA loans, which are insured by the Federal Housing Administration and come with unique benefits and drawbacks.
FHA Mortgages Explained
FHA loans are a mortgage insured by the Federal Housing Administration, a Department of Housing and Urban Development division. Since the federal government backs them, they appear less risky to lenders and thus have less stringent requirements than traditional mortgages.
As such, they can be an excellent option for people with a limited credit history, such as younger adults and first-time homebuyers.
FHA Mortgage Eligibility Requirements
- You have a credit score of at least 580 and a debt-to-income ratio below 43%.
- You’re a U.S. citizen or permanent resident with a valid Social Security number.
- You have a documented steady employment history for the past two years.
- You intend to purchase a single-family or two-unit home for a primary residence.
- The closing costs won’t exceed 3% of the loan amount.
- You’re able to obtain FHA-approved mortgage and homeowners insurance.
Finding The Right Mortgage Option For You
FHA loans are an excellent choice for many people due to their low down payment and flexible eligibility requirements. However, as with any loan, there are also drawbacks that you should consider before you make a final decision. So be sure to weigh all your options carefully before signing any paperwork.
What Are The Pros Of FHA Loans?
- Smaller Down Payments
- Low Debt-To-Income Requirements
- Lower Credit Score Requirements
FHA Loans: The Cons
- Higher Upfront Mortgage Insurance Premiums
- Lower Limits On The Total Amount You Can Borrow
- Higher Closing Costs
The APR Makes Or Breaks A Good Deal
By law, lenders must provide you with the annual percentage rate (APR) for any housing loans you are considering, so make sure to compare them closely when shopping around.
A good APR from a trustworthy lender can save you thousands of dollars throughout the repayment period.
Find Affordable Mortgages In The Las Vegas Valley
At Blackmon Home Loans, we are a local, family-owned mortgage company dedicated to helping you save money and make your homeownership dreams a reality. Contact us today for more information on applying for an FHA loan and schedule a consultation.