When it comes to qualifying for a mortgage loan, there are many different types of programs available. With the many different mortgage programs available, it is important to choose the best program for your particular home loan needs.
One of the home programs you can choose from is a FHA mortgage loan. This type of program is designed for 1st time home buyers. FHA home loans can be used to purchase a primary residence or refinance an existing mortgage. Below are the many benefits to the FHA program.
Reduce Down Payment
A FHA mortgage loan offers buyers a program with a lower down payment. The current minimum down payment for a FHA home mortgage loan is 3.5%. The source of the funds for the down payment can also come from many different sources including a gift from a family member or church, a 401K loan or withdrawal, and any money saved up in a checking or savings account. By allowing the down payment to come from many different sources, the FHA mortgage program helps buyers purchase their new home.
Seller Paying up to 3% Closing Cost
FHA loans also allow the seller to contribute up to 3% towards buyers closing cost. This is extremely important in assisting a buyer purchase a new house and reducing the amount of money needed for closing. Sellers can pay closing cost, prepaid items like taxes and home insurance as well as interest on the loan. For example, if a buyer purchases a home for $100,000, the seller can contribute $3000 towards the buyers closing cost.
Reduce Mortgage Rates
For many clients, FHA home mortgage loans offer the most competitive rates. FHA home loan rates are not tied to credit scores like the way conventional home mortgage loan rates are. For example, if a homebuyer has a credit score of 660, the FHA home mortgage loan the rate would be same if their score was 740, but on a conventional home loan, the credit score of a 660 compared to a 740 would see an increase of about .75% to the rate.
Mortgage Insurance
Another benefit in the FHA mortgage loan program is the approval of mortgage insurance. FHA home loan mortgage insurance is approved as long as the home mortgage loan is approved. This is not the same when it comes to a conventional home loan. Many times, a borrower can be approved for a conventional mortgage loan, but will not be approved for mortgage insurance. This results in the loan being turned down, but with a FHA mortgage loan, as long as the loan is approved, mortgage insurance is approved. Also, the monthly mortgage insurance payment for a FHA home loan is usually less than the private mortgage insurance offered on conventional home mortgages.
Home Loan Size Limits
FHA home mortgages do have set loan limits that are established by HUD. To determine the loan limit in your area, contact your mortgage loan officer. For example, in the Dallas – Fort Worth area, FHA loan limits are $271,050.
Streamline Refinances
Finally, another benefit to a FHA mortgage loan is the ability to do a streamline refinance. A streamline refinance is when a homeowner refinances an existing FHA home loan into a new FHA mortgage. The streamline refinance program allows the client to refinance with limited paperwork. Though, it might be in the best interest of the homeowner to consider a full refinance over a streamline. Consult a mortgage loan advisor to see which program is best for you!
FHA loans are a great way to refinance or purchase a house. It is important to understand the benefits of each mortgage program that you qualify for and to make sure you are getting the best possible home loan.
David White is a mortgage officer with over 10 years experience. He specializes in FHA Mortgage Loans. Begin the FHA Home Loan process today. This article, Benefits In FHA Loans has free reprint rights.