An FHA loan is a form of financing backed by the Federal Housing Administration. Under the terms of the program, the lender is guaranteed to receive a refund of the borrowed money in case the borrower defaults on the loan. We don't want to see that happen, so we work diligently to ensure that the borrower is placed on a loan that is affordable, even if things get a little difficult in the future.
Although FHA packages are often the financing option that many associate with a first-time home buyer, these loans can also be used by others. There are some specific requirements that must be met before approval is granted. To receive one of these federally backed mortgage loans, the borrower must not have purchased a home in the previous 3 years. Borrowers should also not have outstanding mortgages from another lender. However, if a borrower has purchased an FHA loan in the past three years, he could obtain a new FHA if he is selling his existing home or moving to a different state, First time home buyer maryland.
FHA loan programs first began during the 1930s, when the effects of the Great Depression were affecting the country and interest rates were high. The funds were made available to help promote homeownership for working-class Americans. Today it remains a viable home loan program that is structured to make payments easier for people who want to realize the dream of homeownership.
The FHA qualification process makes it easy to obtain a home mortgage for a first-time homebuyer who may have less than perfect credit and even those without credit may qualify. People who have not established a long work history and those who cannot get the money for a substantial down payment can also benefit from FHA loans.
FHA loan applicants must make a down payment of at least 3.5%. They can even make this initial payment with the money they have received as a "gift". This practice of giving away money for the purpose of a down payment is not something that most lenders would allow, even for a first time home buyer.
Applicants with a credit score as low as 620 to 640 can easily qualify for an FHA loan. This same score makes obtaining a traditional mortgage loan difficult. In fact, most lenders want the credit score to be 750 or above. Even if your FICO scores are below 620, we will work with you to quickly rebuild your credit so that you can qualify for an FHA home loan.
These loans are a viable option for people who have had financial difficulties in the past, such as bankruptcy or foreclosure. In these cases, a loan counselor looks for a good credit history for the two to three years after these major setbacks. With traditional lending institutions, this same scenario may require seven to ten years of good credit and payment history before being approved for a loan.
Recent college graduates can also be approved for FHA loans if their current job is directly associated with their field of study. While these financial packages are the best option for some first-time homebuyers, they may not be the right option for everyone.
FHA loans generally have fewer options regarding the payment schedule. For example, a home buyer can only be offered a thirty-year repayment schedule as part of the loan package. Also, some borrowers may find that the loan amounts may not be large enough to cover the mortgage on the home they are looking for.
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