A recurring theme in our blogs is the fact that there are different types of mortgages. The 2 main types of loans that people think about are conventional loans and government loans. Today we will be talking about one type of government loan that is especially popular among first time home buyers: FHA Loans.
FHA Loans: How They Work, Important Details, & Why First Time Buyers Love Them
FHA stands for Federal Housing Administration. FHA does not actually issue mortgages themselves, but rather they insure their mortgage products which protects lenders when loans default. Historically, many first time home buyers and others have loved FHA loans because the qualification requirements are often more flexible.
FHA & Interest Rates:
FHA loans have interest rates that are usually competitive with most other loan types. As with any mortgage loan, your interest rate on an FHA loan is dependent on many factors, including but not limited to: credit, debt to income ratios, market conditions, and many more.
FHA Loan Down Payment Options:
FHA loans are in part very popular because the minimum down payment is only 3.5%. Another convenient option with FHA loans is that 100% of your down payment can be a gift (from a family member or relative). Of course 3.5% is only a minimum and borrowers are free to put higher amounts down as well.
FHA Loan Plus Renovations
One of the coolest things about FHA loans is that they even have an option where you can make improvements/repairs to the home you are buying and roll the cost of the improvements into your loan (if they add appraised value to the house). This program is called the FHA 203k loan. Buyers using the 203k can use borrowed funds to make improvements ranging from new appliances, to new roofs, furnaces, and more. This is a great option for buyers who find a home in a convenient neighborhood that “could” be their dream home if just a few things were updated or changed.
Qualifying For an FHA Loan
Whether you are a first time home buyer or anyone else interested in an FHA loan or FHA 203k loan, please give us a call today at 616-774-9160 so we can help. Treadstone Funding is your local mortgage company in Grand Rapids, MI.