Buying a home is a beautiful feeling, but dealing with the financial aspect of it can be tiring. Well, thanks to mortgages, the financing is no longer a headache. From conventional to Government-insured mortgages, homeownership is now a dream that can be turned into reality once you have done your homework, arrived at a budget, reviewed your credit and nailed down your down payment amount.
The America government is not a mortgage lender but has been helping many Americans become homeowners. How? Through government agency loans, namely:
- Federal Housing Administration, also known as FHA, loans
- The U.S. Department of Agriculture, also known as USDA, loans
- U.S. Department of Veteran Affairs, also known as VA, loans
This article will cover FHA loans: how they work, who is eligible, and everything you need to know about it.
What Is an FHA Loan?
FHA loans give borrowers who do not have a significant down payment saved up and don't have good credit the opportunity to own a home. Since its inception in 1934, the FHA has insured over 40 million home loans.
Types of FHA Loans
FHA mortgagee loans come in different forms. Each form is dependent on your assets, income, age, and current home equity, should any be present. There are seven types of FHA loans:
- Fixed-Rate Purchase Loan
- Adjustable-Rate Purchase Loan
- Condominium Loans
- Secure Refinance Loan
- Home Equity Conversion Mortgages
- Graduated Payment Loan
- Growing Equity Loan
Closing Costs
Like other kinds of mortgage loans, FHA loans come with closing costs. However, expenses may be different depending on lenders, market conditions, geographic location, and down payments.
If you wish to lower your closing cost, you can do so by increasing your credit score, shop through multiple lenders, check for settlement and title companies, or negotiate with the lender you've selected.
FHA Loan Pros and Cons
FHA loans have many benefits such as low down payment, better interest rate, and credit score flexibility. The only downside of FHA loan is that you have to get mortgage insurance that stays with you throughout the life of your FHA loan.
What You need to qualify for an FHA Loan
You will need some form of identification to begin qualifying for an FHA loan. Driver licenses, military IDs, passports, or any other kind of government-issued ID is an acceptable form of identification. You'll also need your bank statements from the last two months and investment statements from the last two years. Be sure to have at least one month of pay stubs available, as well.
If you run a business or you are self-employed, you will be asked to provide:
- Your current tax year profit and loss statement
- At least two of your recent tax returns
Talk to a mortgage and loan specialist to get the process started.
About the Author
Cary Garcia
As a real estate broker licensed in Virginia, Maryland, and Washington, D.C., I work strictly by referral. For over 20 years, my success has hinged entirely on detailed, efficient service to clients like you.
***
Finding a real estate agent is easy. Finding a skilled agent is the hardest…What separates me from other real estate agents is my extensive knowledge of contract law. You need an agent who understands the legality of the contract by enforcing the terms of the offer as well as all of the contingencies, addendums and disclosures. Before signing the offer, I will thoroughly explain the contract in detail, so you understand what you are committing to.I bring an expert’s perspective to help buyers and sellers make the right decisions.
Because I understand the legal and highly emotional aspects associated with real estate transactions, I am able to provide expert guidance to help you make informed and educated decisions. In addition, I’m very skilled at project coordination.
With so many people involved in the home sale process, I know how to create satisfying resolutions and make the process go as smoothly and successfully as possible.