Need to Get a Mortgage? Here’s Why an FHA Loan Could Make Sense
There will come a point in your life when you need to borrow some money to pay for a major expense. For instance, you might want to do some remodeling on a home you want to buy. Sure, you could spend a few months (or years) saving up the cash.
But, what happens if you want to have the money sooner rather than later? Borrowing will be your only choice here. As a future homeowner, you usually have more options than most when it comes to taking out a loan. One of those is to get an FHA mortgage.
So, what exactly is an FHA loan? And is it better than borrowing the money from elsewhere? Learn why it could make sense to get one for your money needs:
You Don’t Need a Squeaky Clean Credit Rating
It’s no secret that most loan applications get assessed according to your credit score. If yours isn’t that good, you will find it harder to get a loan. The ugly truth is that your bank may decline you a loan, even if you pay in thousands of dollars each month.
Lenders are more cautious than usual about who they give money to these days. That’s thanks, in part, to the global economic crisis from the last decade.
The good news for people with less-than-perfect credit ratings is that they can still get an FHA loan. That’s because exceptions can get made in certain circumstances. In other words, a human will make the lending decision, not a computer.
So, if you want to buy a house and fix it up before you move in, an FHA loan could be just the thing you need.
You Don’t Need a Big Deposit
When you take out a mortgage these days, it’s an accepted practice that you must put up big down payment. FHA loans allow you to give a deposit of around 3.5%. If you went for a conventional home loan, you would have to put up 10% to 25% of the property’s value.
Under FHA loan rules, you’re allowed to put up the deposit using cash savings. You can also use money gifted from a relative or friend, too.
Your Closing Costs Could Get Covered Too
When you buy a house, there are plenty of fees you need to cover just before you seal the deal. Some people don’t realize that FHA loans could also cover those costs, too.
That’s a welcome feature of such a mortgage because it means you can free up your money to pay for other things.
You Can Enjoy the Security that Using an Approved Lender Brings
Although we call them FHA loans, the FHA isn’t where you get the money for your mortgage. What happens is the FHA insures the approved lender you use. That way, if you default on your payments, they’ll make sure they get covered.
As you can imagine, you can only get an FHA loan if you use an approved lender. But, the benefit of doing so means you don’t have to worry about using an unscrupulous lender. FHA-approved lenders must stick to the rules.