Even though the housing market had recovered from the crash a few years ago, banks and other lending institutions are a bit wary when it comes to lending money to prospective buyers. This is a problem because there are many buyers that may not have a great deal of money to put down for a home or they may not have perfect credit. In these instances, conventional loans are simply out of the question as these loans require 15% to 20% down and often, they require exemplary credit. For that reason, many buyers who fall into this category or sometimes first-time buyers often look at FHA loans.
An FHA loan is provided by the Federal Housing Administration through banks and other lenders and is extremely beneficial for people who don’t have a large amount of money to put down for a down payment and don’t have excellent credit. The reason for this is that FHA loans typically only require 3.5% down as a down payment which is much more reasonable than 20% down. With down payment assistance programs that many local and state governments offer, many people can get the down payment for their home without actually putting up any of their own money.
Another benefit to these loans is that they will work with people who have mediocre and sometimes bad credit. There are things that some borrowers may have to do to clean up their credit to qualify for one of these new home loans, but they won’t be required to have unblemished credit reports. Given how difficult the financial crisis was a few years ago, there aren’t many people that have credit reports that have remained untouched, and this is exactly the type of loan that people like that they can use to buy a home.
If you’re thinking about purchasing a home but you’re fearful that you won’t be able to get a mortgage due to financial or credit score issues, you may want to consider an FHA loan. With its consumer-friendly requirements, this may be the precise loan to affordably get you into your first home or your next new home.