subject: Benefits Of Fha Loans [print this page] What does "FHA" stand for? "FHA" means Federal Housing Authority. The FHA is unlike other lending institutions. They are not that strict when it comes to granting loans. There are many types of loans, but they certainly have dissimilarities like on interest, terms and repayment plans. If you are looking for financial institutions that offer loans, you have to know all the details about each loan and try to compare each one of them for you to determine which one is the most favorable to you.
When it comes to interest rates, FHA loans have lower rates as compared to others.
They also have fixed interest rates and this is the reason why many people consider it one of the best loans. If compared to subprime mortgage loans, FHA loans are far better because subprime mortgage loans apply variable interest rates. Plenty of home investors have availed of the subprime, but have regretted it after a few years because the interests have gone so high. When you apply for an FHA loan, you are given many options, and this is what most borrowers like about this type of loan. Most lending companies require a credit score of 740 before they approve your loan, but with FHA, you only need to have a credit score of 640. This applies when you want to buy a house.
FHA loans are not really that strict with their requirements because even borrowers who have gone bankrupt or have faced foreclosure can still be granted a loan. But there are certain conditions to this. A borrower must be able to show all his credit records two years before his bankruptcy or three years before the foreclosure of his property. He should have a perfect credit score in the past before he'll be given a loan. Well, that's not easy, but they really need to be strict on these details as a protection on their part. Before you will be granted an FHA loan, they will require you to show a record of your employment history. They need to see that you were able to work in a single company for at least two years. This is to ensure that you have a stable job and have the capacity to pay them back.
After being grated an FHA loan, you have to make a down payment of 3.5% based on your loaned amount. This is one of the most important requirements in getting an FHA loan. As to the repayment terms, the monthly repayments should not be more than 31% of the borrower's gross monthly salary.
There are numerous financial institutions that offer loans, but you will really have to go through the hole of a needle before your loan will be granted. FHA loans are not equally strict with their requirements and they have lower interest rates as compared to most lending institutions. You don't even need to have a high credit score as long as you can show them your positive credit records in the past, and that you are capable of repaying them.
