An Overview of Federal Housing Administration (FHA) Loans
It was during the time of the Great Depression or thereabouts that the FHA was established to enable the Americans to buy homes. The organization is still active today and FHA loans are known for their low down payments, low interest rates and flexibility.
The FHA Home Loans Program
About 40 million Americans, and counting, are the proud homeowners under the FHA housing loans program, since its inception. You must understand that the organization does not offer loans, but provides a kind of mortgage insurance that reassures lenders that they will not suffer in case a borrower defaults on a loan. The FHA will cover all the losses incurred because of the same.
The Benefits of FHA Loans
The borrower gets all the benefits because of the assurance provided by the FHA. The FHA safety net means that the mortgage companies, as well as, banks offer the FHA mortgage at lower down payments. When you buy a home with a loan that has been insured by the FHA, your down payment is as low as three percent.
Moreover, if you want to refinance your loan and convert the equity on your home to cash, you will get almost 95 percent of your home worth that is far higher a figure than the amount you might get in today’s market.
The Working of FHA Insurance
Homeowners will have to pay for the FHA insurance by means of combination of an upfront insurance payment as soon as the loan originates and Private Mortgage Insurance (PMI).
FHA mortgage insurance premium can be removed from the monthly payments made, when the balance of the mortgage comes down to a level of 75% of the original home loan amount. Moreover, in an effort to make the FHA home mortgage more accessible to all kinds of people, the FHA offers leniency in terms of payments and helps those with lower incomes by lending them money.
Maximize Your Amount
The FHA mortgage loan is also being used as a tool to stimulate the US economy. Moreover, in a bid to help its effort, it was given the right to raise the FHA home loans limit. This means that borrowers can now borrow a larger amount of money, almost twice as much as before. The increase in the size of the FHA home loans has meant that is has now emerged as an able competitor in the higher-priced housing market.
It now offers an alternative to offer larger and more luxurious homes at affordable rates, while offering an advantageous rate of refinancing the existing mortgage on such a house.
FHA loans are considered the best option for a first time homebuyer and somebody who does not have a great credit rating. In such cases, there is very little reason to compare rates and quotes as the lenders are willing to offer you the lowest quotes going around.
Therefore, if you want to buy a home or want a loan for some other purpose, then a FHA mortgage might just be the right choice for you.