The Federal Housing Administration provides mortgage insurance on loans granted by FHA-approved lenders. A FHA mortgage insurance policy gives lenders protection against losses that result from homeowner default. The benefits of this type of loan are:
Lower Down Payment: FHA loans require a low down payment. You can deposit as little as 3.5 percent. A bonus is this allows you to start building equity sooner.
Lower Mortgage Insurance: The insurance fee is lower than the fee you would pay on a conventional mortgage. The overall monthly payment is also lower.
Better Interest Rate: FHA offers the same low-interest rate to all borrowers. If you qualify for a loan, you get the current rate and the guidelines do not require a minimum credit score.
Higher Seller Contribution: This type of loan has a higher allowable seller contribution and you can negotiate to have the seller pay most of the closing costs.
The FHA approval process involves the following 5 steps:
- Pre-approval during which the lender reviews your financial circumstances.
- A standard Loan Application also known as a Uniform Residential Loan Application. You must give them information about the type of loan you want and the property address.
- A property Appraisal which involves having a licensed home appraiser determine the true market value of the property based on sales prices and the condition and unique features of the property.
- An underwriting and documentation review that involves an analysis of your income, paperwork, and credit score.
- FHA loan approval if the underwriter is satisfied you meet all of the lender’s guides and FHA guidelines.
A mortgage group can help you find the best possible home loan at the lowest interest rate available. For more information please contact us.