![]() ![]() Low down payment requirements: A 20% down payment is considered ideal for most types of loans, but FHA loans are available with down payments as low as 3.5% of the purchase price.Ĭompetitive interest rates: Interest rates on FHA loans are comparable to conventional loans, but rates are sometimes lower for FHA loans since they have a lower base interest rate. The higher your credit score, the more favorable your loan terms will likely be. However, most lenders require a minimum score of 580, which is still lower than the conventional loan minimum of 620. Low credit score requirements: You may be able to qualify for an FHA loan with a credit score as low as 500. Here are some of the most important pros and cons of FHA loans. Pros and cons of FHA loansĪ mortgage is a big commitment that can affect your finances for up to 30 years (depending on your mortgage loan term, e.g., 15, 20, or 30 years), so it’s important to do your due diligence. Because the program protects the lender if borrowers default on the loan, qualification criteria like credit score and down payment are lower than other loan types such as a conventional loan. FHA loans are government-backed and insured by the Federal Housing Administration. ![]() What Is an FHA Loan?Īn FHA loan is a type of mortgage that is popular with first-time buyers. Federal Housing Administration loans, more commonly known as FHA loans, are a popular choice for many home buyers, especially those who may be purchasing a home for the first time.
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