October 24, 2017
How do I know if an FHA loan is right for me? If you aren’t sure, consider some of the most important features of an FHA mortgage while making up your mind about the right home loan for you.
FHA Loans Have Low Down Payment Requirements
FHA mortgage loans have lower down payments than many conventional or other non-government backed mortgages. The minimum down payment for an FHA mortgage is 3.5% of the adjusted value of the home, and FHA loan rules permit you to get down payment help from approved sources.
Credit scores play an important part in setting the down payment amount, so you’ll need to discuss your circumstances with your loan officer if you aren’t sure whether you qualify for the lowest down payment, but in general you may find FHA mortgage loans still have a smaller amount required than the conventional loan equivalent.
FHA Loans Are For A Variety Of Homes
Participating lenders have the option of offering FHA mortgages for condos, townhouses, mobile homes, modular homes, and mixed-use property that is primarily residential. You don’t have to buy a house in the suburbs with an FHA mortgage; FHA home loans are flexible enough to meet the needs of many types of house hunters.
FHA Loans Protect The Borrower In Important Ways
FHA loans do not allow penalties for paying more than your monthly mortgage payment and you can’t be penalized for paying off the loan early. Borrowers should know that FHA loan requirements include insuring the home has a “remaining economic life” that lasts the duration of the mortgage term.
FHA loan rules specify that the lender and appraiser must be independent of one another, and no party with a financial stake in the outcome of the mortgage can contribute money toward the transaction. That’s a rule that may sound like it isn’t helpful to the borrower, but it’s really designed to prevent third parties from creating a conflict of interest.
FHA Loans Are For Multi-Unit Properties, Too
FHA loans are for home with as many as four living units. If you have ever wondered what it would be like to be an on-site landlord and own a rental property, an FHA home loan may be able to help you do just that.
It’s important to note that in such cases the borrower must live in one of the units-you must be an owner/occupier of the home you buy with the FHA mortgage.
Your lender will want to know if you have any prior property management experience, and for how long. Be sure to have any relevant documentation ready for your lender to review at application time in such cases, you’ll save plenty of time having the right tax documents and other information handy.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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