It is little wonder FHA loans are an important component of the housing market today. When it comes to buying a single family home or a condo, FHA loans can offer an affordable and low down payment home loan option. With FHA loans being accessible to lower credit score requirements and a lowered mortgage insurance premium on new loans, FHA mortgage rates are lowered for both first time and repeat buyers, as well as homeowners looking to refinance.
So what is an FHA Mortgage?
The Federal Housing Administration (FHA) backs FHA mortgages, and the FHA’s goal is to insure loans to buyers while protecting lenders against loss on loans that go poorly. With the goal of providing affordable homes to strong communities, the FHA has less rigid lending guidelines. Part of their flexibility is granting loans to buyers with low or no credit scores. This applies to homes and condominiums.
FHA Loan Facts:
People with credit scores under 500 are typically ineligible for FHA loans. Minimum credit scores for FHA loans vary; based on the form of loan the borrower seeks. For instance, to get a mortgage with a down payment as low as 3.5 percent, the borrower needs a credit score of 580 or higher, while those with credit scores between 500 and 579 will need to make down payments of at least 10 percent.
Low Down Payment
A huge draw to the FHA loan is the low down payment. The FHA requires a down payment of only 3.5 percent of the purchase price of the home for most borrowers.
Lender Must Be FHA Approved
As we mentioned, the FHA is a loan insurer, and not a traditional lender. Because of this, borrowers will need to get their loan through an FHA-approved lender and not directly through the FHA. It’s important to remember that not all FHA-approved lenders offer the same interest rate and fees.
If you’re looking to buy a home, there are a number of loan options available. Our award-winning real estate agents are here to help you assess what your best option is, while aiding you in finding your dream home.
Interested in buying or selling a Nashville home? We can help. Give DeSelms Real Estate a call at 615-550-5565 or drop us a line today.