For all those with a bad credit score or are unable to pay for the down payments for securing a loan, considering applying for Federal Housing Loan (FHA) will be the best option. The FHA loans were especially designed for people who were unable to borrow money at hefty interest rates and belonged to low income group. Now several lending companies have started running the option of FHA loan-like loans for those people who do not qualify for the usual mortgages or PMIs.
The FHA loans usually come with a very small sum of down payment money, usually amounting to not more than 4% of the paying price of the property. Now you can either pay this down payment from your own account, or show the payment amount as a gift from a relative or a grant from a family member. Thus, taking these loans is very easy and the only qualifying parameter for these is that you should not be eligible for the normal PMI loans. For all the bad credit scorers, simply proving that the bad credit score was due to certain circumstances that occurred suddenly can help in obtaining the FHA loan. Furthermore, the interest rates also do not get too high for the buyer to manage the loan. In addition, if you have been paying for the FHA loan regularly for the last few months, then refinancing gets even easier.
Most of the FHA loans have a very low rate of interest attached to it. Some lenders also provide for adjustable interest rates for these FHA loans. Secondly, the FHA loans are assumable in nature. This means that if the property owner decides to sell his house some time later, hen the new buyer does not have to qualify for the loan. He can simply take on the task of paying the EMIs and get going. Furthermore, the FHA loans also provide for the buyer to pay 6% of the closing costs, thus saving you a lot of such extra expenses, which you have face in the process of buying a home.
While there are many advantages of opting for a FHA loan, do not assume that the picture is all rosy. There are certain factors that the buyer should keep in mind when opting for these FHA loans. One of the biggest disadvantages of the FHA loan is that there is another inbuilt payment that you require to pay to the lender. This is called as the Mortgage Insurance Premium (MIP) and forms 1.5% of the total loan amount. The MIP helps in protecting the lender in case the borrower is unable to pay for the loan. Further, just because FHA loans are easily available even to bad credit scorers doesn’t mean that you pile this FHA loan on above the other mortgages you have. Budget well and once you are sure that you can sufficiently manage for the EMI, only then apply for the FHA loan.
Now for all those facing issues in getting a mortgage to finance their new buy, leave aside all worries. FHA loans are here to serve you to the fullest.
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