For almost everybody, getting a house means availing of a loan. Unless you are wealthy and have a lot of cash, you will have to look for a mortgage to finance your purchase. There are all kinds of mortgage types for homebuyers, so it’s smart to research appropriately and decide which would be the best choice for you. One that you might consider is an FHA loan.
What’s an FHA Loan?
An FHA loan is a mortgage that’s used for renovating or purchasing a residential property. This loan is insured and backed by the government specifically, the Federal Housing Administration (FHA).
Pros and Cons of an FHA Loan
It’s quite crucial that you evaluate the advantages and disadvantages of FHA loans San Antonio to ensure that it is right for you.
FHA Loan Pros
One of the pros of an FHA loan is that it’s one of the easiest to qualify for since it has low requirements. Even if you have a low credit score, you can get approved for an FHA loan.
Low Down Payment
FHA loans don’t only have low requirements, but they also have a low down payment. Usually, the higher your credit score, the lower your down payment. If your credit is above 580, you can avail of a low down payment for as low as 3.5%. On the other hand, if you have a low credit score, you might need to pay 10% down payment, but this is still lower than the usual 20 to 30% from other mortgage loans.
An FHA loan allows buyers to take over a seller’s mortgage, so they don’t have to apply for a new loan. This benefits the borrower since you can still qualify for an FHA loan even if you have a low credit score.
For housing-related debt, the debt-to-income ratio requirement is 31% while for total debt, it’s at 43%.
If you want to have your home repaired, you can try the 203(k) loan from FHA. This allows you to address any repairs needed in your house or allow you to buy a house.
FHA Loan Cons
You need to pay insurance premiums both annual and upfront. The more you typically borrow, the more you need to pay.
A lender must first be approved by FHA to offer you an FHA loan. However, this also means that they can have their standards when it comes to choosing people who they will approve.
Minimum Property Standards
If you suddenly stopped paying your home, the lender can resell your house as protection. So beware.
Lastly, an FHA loan has a max and min amount based on your area. So check this first before choosing an FHA loan.
And that’s about it! Have you decided whether or not you are going to avail of an FHA loan or not? It is best that you weigh in its pros and cons, so you will know if it’s really for you or not.