FHA Loans: Great for First-Time Home Buyers
An FHA loan is not a loan distributed by the Federal Housing Administration (FHA). In truth, an FHA loan is a program that insures home loans, and does not fund your home loan. What the FHA does is provide mortgage insurance to help homebuyers. This way, people who don’t usually qualify for loans, such as lower-income Americans and those with poor or no credit, can purchase homes.
FHA loans are great for people who want to buy a house with a small down payment. Right now, the down payment for FHA loans is only 3%, but come January 1, 2009 the down payment will be 3.5%. That’s still reasonable for those who fall in the low-income bracket.
In fact, even those with no credit at all yet (or zero credit) can receive a loan using the FHA loans program. This is one of the main reasons why people who normally think they don’t qualify for a mortgage turn to FHA loans instead.
These reasons make FHA loans the first choice for first-time homebuyers. The FHA allows a higher debt-to-income ratio, and because the down payment is incredibly low, people with little savings can still afford to purchase one that they like. It’s better than wasting it on paying rent for a house they can barely call a home. FHA loans are also okay for those who have higher incomes. There is no maximum income for qualification, but it also depends on certain counties.
First-time homebuyers should seriously consider FHA loans. Not only will they have enough time to prepare for future mortgage payments, they will reap the benefits of being in a home early in the program, too.