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10 Benefits of FHA Loans You Didn’t Know About

January 26, 2022 Leave a comment

10 Benefits of FHA Loans You Didn’t Know About

In this article, you will find out how FHA loans work, the benefits they provide, and if an FHA loan is right for you.

What are FHA loans?

FHA home loans are a type of Government-backed loan program. The Federal Housing Administration was created in 1934 to help boost homeownership in America. At the time, you needed perfect credit and high down payments to qualify for a mortgage.

The FHA acts as insurance on the loan itself. If a borrower defaults on the loan, the FHA will reimburse the lender the amount due. This dramatically reduces the risk for lenders allowing them to have much lower minimum qualifying guidelines and offering mortgages to more borrowers.

Why Do People Like FHA loans?

FHA loans have been very popular in the U.S. for a long time. This is because a borrower can qualify with a low down payment of just 3.5%; this is lower than conventional loans.

Another popular feature of FHA loans is the low credit score requirements. The FHA will fund any mortgage loan where the borrower has at least a 500 credit score with a 10% down payment. If the borrower has at least a 580 credit score, the borrower is just required to have 3.5% down to qualify.

FHA Loan Benefits

  • 580 Credit score requirement
  • 3.5% down payment with 580 score
  • Gift money can be used for 100% of down payment
  • Low mortgage rates
  • The seller can pay up to 6% of closing costs
  • Non-occupying co-borrowers and co-signers allowed
  • DTI ratios as high as 50%

1. Buyers with Low Credit Scores Can Qualify

The biggest reason that FHA loans are so commonly used today is that you don’t need perfect credit to qualify. FHA loans are widely known as bad credit mortgage loans. They have the lowest credit score requirements of any mortgage offered today. Read more…