November 1, 2010
As the official site of the Department of Housing and Urban Development says, the FHA loan program has been running since 1934. This program is designed to help ordinary people get into affordable home loans with low down payment requirements, low closing costs and credit requirements that are more lenient than conventional loans.
In fact, many soon-to-be homeowners turn to the FHA loan program because they are unhappy with the terms they are offered based on their credit score or they’re worried their credit might not be good enough to qualify for a conventional loan. FHA loans are often the best gateway to home ownership for some, but what does an FHA mortgage offer the typical first time home buyer?
The low down payment is the most attractive feature for some. The downpayment can be as low as 3.5% of the purchase price of the property. Closing costs and fees may be included in FHA loan financing depending on the deal you make with the lender. FHA guaranteed mortgages are for single-family homes but can also be used on properties with up to four units as long as the buyer intends to live in one of those units.
FHA loans are also available for fixer-upper properties. In cases like these you might not have to pay for the renovations out of pocket–qualified borrowers can include the cost of repairs, upgrades and remodeling into the loan.A related program allows home buyers to build in the cost of energy-efficient improvements to the home. An FHA mortgage can include the cost for adding these energy efficient improvements regardless of whether the home is a fixer-upper or not.
FHA guaranteed loans are also available for mobile homes and manufactured homes. The FHA offers terms on two different programs; one is for those purchasing a mobile home intended to be placed on a plot of land the borrower already owns and one for those who want to rent space in a mobile home park.
It’s easy to see that FHA loans offer many advantages over conventional loans, especially where down payment and closing costs are concerned. If you’re considering your options between conventional loans, be sure to examine what the FHA offers, too–you might be pleasantly surprised.
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.
Browse by Date: