A lot of people who are looking to own a home know that they have an option called FHA loans but they do not know exactly what that means and they specifically do not know what it means in terms of them trying to secure funds to purchase a house with a lower level of income. Well, it is relatively easy to understand and taking advantage of this offer is an excellent way to own property and also to provide for a family.
The government, in order make it easier for people to own a home, established the Federal Housing Administration. This department insures the lenders against losses in cases where the homeowner defaults. By providing FHA loans, lenders are allowing people who may not otherwise qualify for a housing loan to get financing. For the lenders this is not a risk however because there is a guaranty from the government on the money.
While FHA loans do offer people a chance to own property it is not without its own requirements. One must typically have two years of steady employment and preferably in the same field. Additionally, it reflects positively if there is a trend of increasing compensation for your work as time goes on. Additionally, it is necessary that a person can afford the minimum payment on the amount borrowed. That typically means that it cannot be more than 30% of one’s total income and all finance charges including auto loans, student loans, and credit car bills cannot be more than about 40% of monthly income. It is also necessary to have relatively good credit and not have any recent bankruptcies or foreclosures. Finally, one is only eligible to have one federally backed loan at a time so be aware that if the total of the new home is not covered by the amount borrowed one will have to find alternative financing.
FHA loans are fantastic options for first time homeowners because they allow for a relatively low down payment. This allows those with relatively little savings to be in a home easily. Usually the amount necessary is less than 3% down. Also, while decent credit is strongly favored it is not necessary to have perfect credit or even extensive credit history. Often first time buyers are accepted. Also, they have a relatively low interest rate compared to other types of financing.
Although FHA loans offer a great benefit to those who are eligible they may not be for everyone. Instead of relying on this one type of financing it is better to talk with a broker about the many options available. Also, because the interest rate is negotiable for borrowers it is worth shopping around fro the best rate.