Is an FHA Loan Right For You?
FHA loans offer fewer restrictions for homebuyers shopping for a mortgage in Vancouver, Washington. These loans, insured by the Federal Administration, offer some people a better deal than a conventional loan.
Before you decide if this type of loan is right for you, it’s important to understand how they work.
FHA Loans Offer Easy Qualification
Many first-time homebuyers choose FHA loans because they can qualify with a low down payment of 3.5 percent. If you don’t have even that amount, you can use money gifted to you by another person.
For example, some young people are ready to buy a home but haven’t had time to save. An FHA loan allows those people to get help from a parent or another individual for a down payment.
You can also use the Chenoa Fund, a down-payment assistance program, with an FHA loan. With this plan, you pay zero down, and there’s no cap on income or geographical location.
A low credit score doesn’t automatically mean you’ll have to pay a high-interest rate. Lenders are willing to relax their qualification requirements because these loans are government backed.
Easy access accounts for the popularity of these mortgages with first-time homebuyers who haven’t built up savings. In Vancouver and Portland rents are high and many young working people would love to get into a home of their own.
Potential Drawbacks of an FHA Loan
Before you say that an FHA loan sounds too good to be true, you should know about their potential drawbacks. The benefits are great for those who can’t qualify for a conventional loan. But fees and mortgage insurance for an FHA loan will add to their price.
Borrowers pay insurance on their mortgage for the life of the loan. Other types of loans allow you to cancel insurance after a certain number of years. If you have a down payment and can qualify for a conventional loan, that will most likely offer you a better deal.
Is an FHA Loan Right for You?
If you don’t have money for a down payment an FHA loan can be the right choice. These loans are a good choice for those with a credit score of 650 or lower.
Borrowers who choose an FHA loan are generally looking for an alternative to the requirements of a conventional loan, such as a large down payment, a high credit score and a low debt-to-income ratio.
An FHA loan will cost more over time than does a conventional loan. That doesn’t mean they are a bad deal. Paying a monthly mortgage payment rather than rent is an investment in your future and gives you the satisfaction of home ownership.
FHA Loans at a Glance
- Low down payments
- Chenoa zero down-payment assistance available
- Relaxed income and credit requirements
- Fixed- or adjustable-rates
- Money for down payment can be a gift from relatives or employers
- Sellers can pay up to 6 percent of closing costs
FHA loans have been around since 1934. They have helped thousands of Americans buy a home. Contact me to learn if this is the best option for you.