HomeBuyer University: Buying a Home, Just Got Easier
Course 3: Loan Type Overview
Step 1: Conventional Loans – Only 5% Down Payment
FHA Loan - Only 3.5% Down Payment
The Federal Housing Administration (FHA) mortgage loan is a government-backed program where the private mortgage insurance (PMI) is subsidized by the Federal government. All types of borrowers looking to obtain home financing use this incredible loan program, including first-time home buyers. This lesson provides a general overview to help you determine if an FHA Loan CT is right for you.
Advantages of FHA Financing
There are several significant advantages of FHA financing. The lowest down payment for FHA loans is 3.5%, which aids home buyers who do not have a larger down payment. An FHA loan also allows borrowers to use gift money for the down payment and closing costs. These mortgages may also be assumed, meaning that it may be transferred to a borrower (if they qualify). This can help if interest rates rise dramatically. Finally, FHA does not penalize buyers for credit rankings. Although home buyers must still maintain a minimum score, higher interest rates usually do not result from lower scores.
Downsides of FHA Financing
There are downsides of FHA financing to keep in mind. FHA mortgage insurance (MI) is normally more than a conventional loan. There is an up-front premium to be added to the total closing costs. For condominium units, the complex must satisfy particular guidelines such as;
- minimum reserve funds.
- certain owner occupancy levels.
- be an approved FHA association
NOTE: If the condo association is not approved by the Federal Housing Administration (FHA), or is behind on the renewal paperwork, First World Mortgage will help get the association approved at no charge. Management companies usually charge as much as $2,000 for this service, which is one of the reasons why so many condo associations fall behind in their paperwork.
FHA Mortgage Overview
FHA makes home ownership a reality for many who would otherwise not qualify. Consult with an FHA loan professional to better assess this option by calling (860) 236-LOAN.