The mortgage loan used by many first-time homebuyers is an FHA loan. This type of loan is offered by approved lenders and is insured by the Federal Housing Authority (FHA). There are several reasons these mortgage loans are so popular with not only first-time homebuyers but other borrowers, including those seeking to refinance. So, is an FHA loan right for you?
FHA Loan Benefits
FHA loans offer a variety of unique benefits that can make it easier to achieve the American Dream of homeownership.
Low Down Payment Requirements
To qualify for this type of loan, borrowers may only need 3.5% of the sales price of the home as a down payment. That means that for a home that costs $350,000, the borrower may only need a down payment of $12, 250.
Lower Credit Scores Can Still Qualify
FHA mortgages may be available to borrowers with lower credit scores. In some cases, borrowers with a credit score of 580 may even qualify for a loan.
Borrowers Can Use Gifts for a Down Payment
Conventional loans do not allow borrowers to use gifts from a family member as a down payment for a home. You are permitted to use gifts or other down payment assistance with an FHA loan.
Sellers Can Pay More of the Closing Costs
With an FHA mortgage, the seller can pay up to 6% of the closing costs. Other loans often cap the seller’s contribution at 4%.
Types of FHA Mortgages
There are several types of loans that are backed by the Federal Housing Authority. Both fixed-rate loans and adjustable-rate mortgages are available. The 203(b) Home Mortgage Loan is available for a primary residence that includes 1-4 units. This loan can be used for a purchase or refinance. The 203(k) Streamline program allows you to add up to $35,000 to your loan to remodel and the 203() Full can accommodate even larger budgets, renovate, or rehab the home you’re buying. FHA also offers construction to permanent loans to finance building your new home. Finally, you may obtain an energy-efficient mortgage, which allows you to make energy-efficient updates to your home.
Are There Any Downsides to an FHA Home Mortgage?
FHA mortgages do have a few potential drawbacks. First, if you make a small down payment, you’ll be required to carry mortgage insurance. This will include a one-time up-front premium, followed by annual premiums paid monthly. The cost is typically about 1.75% of the home price. Additionally, borrowers may also pay monthly Mortgage Insurance for the life of that loan. You should also know that there are limits to how much money you can borrow. The Federal Housing Authority sets limits for each metro area. In a low-cost area, you can only borrow a maximum of $331,760. In a high-cost area, you can borrow up to $765,600.
Talk with a Mortgage Broker About FHA Mortgage Loans in Oregon
If you’re buying a home, or considering refinancing your current home, and want to learn if an FHA loan is right for you, talk with an experienced mortgage broker. One of the benefits of working with a mortgage broker is that they will provide you with all possible financing options, and then help you make the best decision, based on your unique goals and needs. In addition to FHA options at Strategic Mortgage Solutions, our brokers can help you find the perfect conventional loan, jumbo loan, VA loan, USDA loan, construction loan, and more. To speak with an experienced mortgage advisor today, send us a message or call 541-275-1148.