Trying to figure out which type of home loan product works for you can be confusing. Which has the best benefits and suits your needs? If you’re a first-time homebuyer, chances are, an FHA loan may be catered to what you’re looking for. What does FHA stand for and how can it help? Read more to find out what you should know to consider this option.
What does FHA stand for?
FHA simply stands for Federal Housing Administration. This is a popular loan type for first-time homebuyers. FHA financing was developed to provide homebuyers with an alternative to conventional financing, and include attractive and flexible guidelines. Because it is government-backed, it’s possible to qualify for an FHA loan with a lower credit score than on conventional loan programs.
FHA definition and purpose
This one is great for those of you out there who don’t have a 20% down payment. An FHA loan means the government backs it. Therefore, you can qualify for a loan with as little as 3.5% down, as long as you have a credit score of 580 or higher. Remember, just because the government has your back doesn’t mean you can forget about your payments; it just makes it easier to get that house of your dreams.
What is FHA vs conventional loan?
FHA and conventional loans are two different types of loan programs. Firstly, FHA is usually the more appealing option to first-time homebuyers, due to more flexible pre-reqs upfront to be approved for one. FHA loans are known for, if you qualify, their smaller down payment requirements of 3.5%, their lower credit score requirements, and their usually lower interest rates. However, conventional loans often have a higher loan amount limit and the possibility to opt out of having to pay for private mortgage insurance.
That’s helpful. What should I do now?
Speak with your local loan officer to see if an FHA loan is what you need to start homeownership. Any proven lender should have a variety of different loan products they offer. Ask about a FHA loan to see if you qualify for it, and if it’s your best option. Don’t just settle for the first one thrown your way; dig around and see if another loan type suits your financial situation best!
Knowing what type of home loan to choose can be difficult when there are a variety of options. You’ll want to make sure you have an understanding of requirements and what your personal financial situation looks like to know what your best choice is. Luckily, you now at least understand the FHA definition and how that could benefit you. Though, as always, know you have a Movement loan officer that is a phone call away to help you learn more.