When it comes to applying for a mortgage, there are many different types of programs available. With the many different mortgage loan programs available, it is important to choose the best program for your particular home mortgage loan needs.
One of the home programs you can choose from is a FHA home mortgage loan. This type of program is designed for 1st time home buyers. FHA home loans can be used to purchase a primary residence or refinance an existing mortgage. Below are the many benefits to the FHA program.
Lower Down Payment
A FHA mortgage loan offers buyers a program with a lower down payment. The current minimum down payment for a FHA mortgage loan is 3.5%. The source of the funds for the down payment can also come from many different sources including a gift from a family member or church, a 401K loan or withdrawal, and any money saved up in a checking or savings account. By allowing the down payment to come from many different sources, the FHA home loan program helps buyers purchase their new home.
Seller Paid Closing Cost
FHA loans also allow the seller to contribute up to 3% towards buyers closing cost. This is extremely important in assisting a buyer purchase a new house and lowering the amount of funds needed for closing. Sellers can pay closing cost, prepaid items like taxes and home insurance as well as interest on the loan. For example, if a buyer purchases a home for $300,000, the seller can contribute $9000 towards the buyers closing cost.
Lower Mortgage Rates
For many buyers, FHA mortgage loans offer the most competitive rates. FHA mortgage rates are not tied to credit scores like the way conventional home mortgage loan rates are. For example, if a client has a credit score of 660, the FHA mortgage loan the rate would be same if their score was 740, but on a conventional home loan, the credit score of a 660 compared to a 740 would see an increase of about .75% to the rate.
Mortgage Insurance
Another benefit in the FHA mortgage program is the approval of mortgage insurance. FHA home loan mortgage insurance is approved as long as the mortgage is approved. This is not the same when it comes to a conventional mortgage loan. Many times, a borrower can be approved for a conventional home loan, but will not be approved for mortgage insurance. This results in the entire loan being denied, but with a FHA mortgage, as long as the loan is approved, mortgage insurance is approved. Also, the monthly mortgage insurance payment for a FHA home mortgage loan is usually less than the private mortgage insurance offered on conventional home mortgages.
Home Loan Amount Limits
FHA home mortgage loans do have set loan limits that are established by HUD. To determine the loan limit in your area, contact your mortgage advisor. For example, in the Dallas – Fort Worth area, FHA loan limits are $271,050.
Streamline Refinances
Finally, one of the best benefits to a FHA mortgage loan is the ability to do a streamline refinance. A streamline refinance is when a client refinances an existing FHA mortgage loan into a new FHA home mortgage loan. The streamline refinance program allows the homeowner to refinance with limited paperwork. Though, it might be in the best interest of the homeowner to consider a full refinance over a streamline. Consult a home mortgage loan officer to see which program is best for you!
FHA loans are a great way to purchase or refinance a house. It is important to understand the benefits of each mortgage program that you are applying for and to make sure you are getting the best possible home loan.
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