Most buyers need to take out a mortgage loan when they purchase a home – and if you’re one of them, you already know that there are several types of loans available.
But what are FHA loans, and is it the right kind of financing for you?
What Are FHA Loans?
An FHA loan is very similar to other types of traditional mortgage loans except that it’s insured by the Federal Housing Administration. They insure loans on single-family and multi-family homes; in fact, they’re the largest insurer of mortgages in the world.
FHA mortgage insurance protects lenders from the risk of loss should a homeowner default on payments. The FHA will pay the lender if a homeowner defaults, so in many cases, lenders are more comfortable taking bigger risks than they would on mortgage loans without FHA backing.
Are There Advantages to FHA Loans?
As with any type of loan, FHA loans have advantages and disadvantages. Some of the advantages include:
- Flexible qualification requirements
- Desirable interest rates
- Lower down-payment requirements
The credit scores required for FHA loans depend on what the borrower needs. For example, if you want to buy your home with only 3.5 percent of the purchase price as your down payment, you’ll need a credit score of 580 or higher.
If your credit score is between 500 and 579, you’ll need at least 10 percent of the home’s purchase price as your down payment. Typically, people with credit scores below 500 aren’t eligible for FHA loans; however, sometimes the FHA makes exceptions.
How Do You Get an FHA Loan?
It’s important to remember that the FHA isn’t a lender. Instead, they insure loans from traditional lenders. If you want to take out an FHA mortgage loan, you’ll need to apply through an FHA-approved lender – and you’ll need to shop around for the best rates and costs, just as you would with any other type of mortgage loan.
Are You Buying a Home in the Tampa Bay Area?
If you’re thinking of buying a home in the Tampa Bay area, we can help you find one that’s a perfect match with your needs.
Call us at 727-584-8480 or 813-961-6000. If it’s easier, you can also contact us online to let us know what you’re looking for in your next home; we’ll build a custom search based on your requirements.