WHY IS A FHA LOAN THE BEST OPTION FOR FIRST-TIME BUYERS?
If you need a loan that will make life a lot easier for you as a first-time buyer, than the Federal Housing Administration option is the right choice for you to choose because an FHA loan makes buying a house an easier process for you. Most of the houses insured by the Federal Government are […]
If you need a loan that will make life a lot easier for you as a first-time buyer, than the Federal Housing Administration option is the right choice for you to choose because an FHA loan makes buying a house an easier process for you.
Most of the houses insured by the Federal Government are usually tailored to benefit anyone buying a house for the first time. There are many benefits of getting an FHA loan, such as the low cost and less restrictions. These make the home-buying experience a much easier process.
The Federal Housing Administration (FHA) is designed to help homebuyers who are low-income earners.
All the reasons stated above are what contribute to making it the best option for homebuyers who find it difficult to take loans from traditional mortgage firms.
The cost of housing is said to be going over the roof, added to the student loan burden skyrocketing to more than $25,000 per person, young people who are usually under the bracket of the “First time homeowner” find it financially stretching, making them worry more about just surviving rather than opting for a loan.
For them, the first-time buyers would see the FHA loan as a way forward, especially knowing that is has gotten easier to access one.
To understand why the FHA loan is the best option for a first-time buyer, we need to understand what the Federal Housing Administration (FHA) is.
What are FHA loans?
Basically, the FHA loans are loans issued by federally qualified lenders and at the same time insured by the Federal Housing Administration. The administration is known to be a division of the U.S Department of Housing and Urban Development. The job of the Federal Housing Administration is not to lend money, but to see that the lender will not face any form of loss, meaning if a borrower fails to pay up on a loan then the government will pay the lender for any losses.
So, with this, the government hopes to encourage homeownership among people who find it difficult to afford a roof over their head especially the young ones we talked about before.
To be more detailed in answering the question, here are some reasons why an FHA loan is the best option for those hoping to buy a house for the first time?
ACCEPTANCE OF DOWN PAYMENT GIFTS
It is true that many mortgage loans allow for down payment in form of gifts. When an approved donor gives you money to help cover part of your down payment, it is known as down payment gifts.
When using an FHA insured mortgage loan, there is a high possibility that you may have the whole down payment given to you in form of a gift. That’s one of the reasons why the FHA loan is the best option for first-time homebuyers.
IT REQUIRES LOW CREDIT SCORE
Unlike the conventional loans, the FHA requires a low credit score and down payments. So, even if you have a credit score of about 590 and a down payment of about 3.5 percent, you will still qualify for an FHA loan.
THEY ARE TRANSFERABLE
Another thing about the FHA loan is that it allows you to sell your house and transfer your Federal Housing Administration loan to the person who wants to buy your house.
Though the homebuyer would still have to read through the HUD guidelines and meet all the requirements before they can assume the loan.
RELATIVELY EASY GUIDELINES
Unlike the conventional home mortgage loans, the qualification requirements for FHA are not that complicated and the reason for this is the government’s involvement in ensuring the lender we talked about it earlier.
When the lenders know that they have “nothing” to lose, the criteria to meet to get this money from them wouldn’t be difficult at all.
If as a borrower you refinance later, it’s possible to enjoy another benefit of a FHA loan. HUD offers a refinance program that minimizes the hassle and stress that comes with the paperwork and the refinancing process.