subject: Fha Loans: Types And Requirements For Potential Homeowners [print this page] FHA loans are government insured loans that are available to hopeful homeowners. While there are criteria and requirements involved with the loan application process, many people look to FHA loans when seeking out mortgages. These loans are insured by the Federal Housing Administration, hence the abbreviation FHA, and the interest rates are low.
Are FHA Loans Easy to Qualify For?
The reason the FHA loans have lower interest rates compared to other lenders is that the loans are insured by the Federal Housing Administration. Generally FHA loans are easier to qualify for as well. Many times hopeful homeowners who dont have perfect credit or who even have a bankruptcy on their credit score can still qualify for an FHA loan.
What Types of FHA Loans are Available?
The most common type of FHA loans is the fixed rate loans. With fixed rate loans the life of the loan is usually 30 years or 15 years and the interest rate does not fluctuate. Basically, the monthly payment of the loan will not change.
Fixed rate FHA loans are the best because you wont have to worry about an interest rate increasing and changing the amount you pay on your monthly mortgage payment. You also will not have to pay more for the loan in the long run as well if its a fixed rate.
There are also adjustable rate loans as well. For some homeowner this is an ideal situation. Adjustable rates will start out lower and will change alongside the Constant Maturity Treasury Index.
There is a downside to this as well. Interest rates can change and increase up to six percentage points depending on the length of the loan. This will cause a huge increase in your monthly mortgage payment.
There are also rehabilitation loans for those who are seeking out additional money for a fixer upper. These programs are known as the 203K Rehabilitation loans and not only include the amount you need for the mortgage, but also any additional cost estimates for repairs.
What Do You Need for a Down Payment With an FHA Loan?
There is a common standard of at least three percent down on FHA loans. There are assistance programs and exceptions for some, but in order to do this youll need to seek out a loan professional.
There are FHA loan assistant programs such as CHDAP, Nehemiah, HUD and the Officer and Teacher Next Door programs. If you qualify for those you may be able to negotiate a smaller down payment than what is usually required.
