The Benefits of FHA Loans

The Benefits of FHA Loans

You have decided that you would like to own a house.  No more renting for you, whether it is because you are looking for a permanent home, you see financial advantages, or you’d like a project to work on.  Some home buyers qualify for an FHA loan.  An FHA loan is a Federal Housing Administration insurance backed loan. 

If you are purchasing the home as a project fix-me-up, you do have to occupy the residence for a year.  Therefore, investors are not good FHA loan clients.  FHA loans are sometimes beneficial to lower-income borrowers or people who don’t have great credit.  Hawk Mortgage Group, a mortgage company in Bel Air, Maryland, has decades of experience in consulting on whether or not an FHA loan is right for you.

With an FHA loan, the borrower has to pay an insurance premium.  This is due to the fact that the prospective home buyer is deemed a higher risk, because of lower income and a lower credit score.  This insurance protects the lender.  A mortgage broker, such as Hawk Mortgage Group is able to shop for the best mortgage interest rates to fulfill your needs.  Brokers are not direct lenders, and they are able to use many different lenders.  

There are several requirements involved in getting approved for an FHA loan.  Of course as stated, the borrower must occupy the home.  This can’t be an investment property.  The home also has to be appraised in accordance with FHA standards.  The inspection must follow the same guidelines.  A down payment is also required, in addition to the insurance premium, but down payments are generally lower, sometimes significantly so when compared with standard loans.

In many situations, an FHA loan is beneficial to someone who has not been able to save a large amount of money, and maybe doesn’t have perfect credit, but knows they are able to make a monthly payment with a small PMI (private mortgage insurance).  Other creditworthy prospective home owners can also be approved if they don’t meet conventional criteria.  Again, a broker is very valuable here because lenders are usually somewhat eager to approve FHA loans for prospective homewowners.  This is because the loan is guaranteed by the government.  Thus, many banks offer and are approved to offer FHA loans, and a broker can shop many of them.

FHA loans were originally created in the 1930’s due to the absurdly high amount of foreclosures from the effects of the Great Depression.  The Federal Housing Administration has gone through a lot of changes, ups and downs, and legislative acts throughout the 20^th century.  They do have to approve brokers as well as lenders, so a highly experienced Maryland mortgage broker such as Jeff Hawk and the Hawk Mortgage Group, are approved and ready to help secure a loan for a prospective FHA home buyer.

First time home buyers, under FHA guidelines, can put down a deposit of as little as 3.5%.  This is an extremely modest amount when considering a purchase of this size.  Even though FHA loans require the borrower to live in the home, the borrower is allowed to add a qualified co-signer who doesn’t have to live at the residence in question.  

FHA loans, like VA loans and USDA loans, allow people who haven’t established approval through conventional means to own a home.  Owning a home can be a dream come true for some.  An approved FHA mortgage broker can help navigate all the options for a prospective home buyer.  Hawk Mortgage, a leading mortgage company in Bel Air, Harford County, Maryland can offer a reliable and thorough consultation.