The FHA Advantage: Five Reasons To Consider an FHA Home Loan

By MortgageCreditProblems.com Columnist
Mortgage Credit Problems Columnist

For decades the Federal Housing Administration has helped millions of Americans achieve the dream of home ownership, and in the last several years FHA-insured mortgages have played a growing role in the housing market. Today about a quarter of mortgages are FHA-insured.

The FHA does not provide the loans, but rather works with hundreds of approved lenders and insures the mortgages. Here are five reasons why you should consider an FHA mortgage.

1. Low Down Payment
If you're a first-time buyer, you may not have the 10 percent to 20 percent down payment required for conventional mortgages. FHA-insured mortgages require only a 3.5 percent down payment, and unlike other loans, the money can come from a charitable organization, a relative or employer.

2. Competitive Interest Rates
Because FHA mortgages are insured by the government, lenders can offer very competitive rates. Remember, though, rates vary among lenders, so shop around for the best deal. Get up to four free quotes from competing FHA-approved lenders by filling out the form on this page. No Social Security number is required, and less-than-perfect credit is OK.

3. Easier to Qualify
It's easier to qualify for an FHA mortgage than a conventional loan because of the government insurance. You still should do whatever you can to improve your credit, but you'll have better luck getting approval for an FHA mortgage than a conventional loan if you've had poor credit.

4. Special Program for Fixer-Uppers
Consider the FHA 203(k) program if you're thinking about buying a fixer-upper. The FHA-insured loan provides money for the purchase price and cost of repairs. The down payment requirement is about 3.5 percent of the total combined cost. The loan amount includes an up-to-20% contingency reserve in case the total remodeling costs exceed the original proposal. After the loan closes, the remodeling and mortgage payments begin, and escrowed money is released to the contractors doing the construction.

5. Energy Efficiency
FHA's Energy Efficient Mortgage program lets you finance costs of energy efficiency improvements to the home as part of the mortgage--a smart move for reducing your utility bills. You don't have to qualify for or put a down payment on the the additional loan amount for energy efficiency, and you can use this program along with the FHA 203 (k) program for fixer-uppers.

For many reasons, FHA home loans are more relevant now than ever. Don't leave them out when shopping for a new home or refinancing your current loan.

 

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