A Brief Look at the History of Providing FHA Mortgage Loans
Also called home loans and mortgage loans, these are a type of financial plan that will allow you to gain ownership of a home. When you're first applying for a home loan, some of the things that you need to prepare include your credit report, your down payment, funds for closing costs and additional fees - and any other documentation that the lender may require.
Now, there are two types of institutions where you can obtain the loan from: private lenders and federal assisted mortgage loans. It's the second one, federal assisted mortgage loans, that we will try to focus on here. One of the most popular types of federal loans is the one provided by the FHA or the Federal Housing Administration.
The ones issuing FHA mortgage loans are lenders who are qualified by the FHA. What makes this type of loan preferable over the privately funded ones is that it is Americans who are under the lower income bracket who can borrow money from the government to purchase a home which they cannot afford otherwise.
Things to Remember when Applying for FHA Mortgage Loans
As compared to privately funded loans, is an FHA mortgage loan more difficult to obtain? It actually depends on whether your income bracket qualifies you to take advantage of the loan or not. The good news is that the FHA loan process is streamlined for those who have a credit rating of 580 or greater - so you can apply for the loan even if you do not have a glowing credit score. For those who still would not reach this credit rating or for those who have yet to establish a credit history, you can actually work with the Department of Housing and Urban Development to establish a credit rating for yourself.
Another advantage of applying for the FHA mortgage loan is that it has a low down payment as compared to commercial mortgage loans. The FHA requires a down payment of as little as 3% of the total amount of the mortgage loan. For commercial home loans, you might need to shell out anywhere from 5% to 10% - depending on your credit rating.
In order for your loan to be approved by the FHA, they will be looking at your credit history, debt ratio, whether or not you have declared bankruptcy in the last ten years, as well as your citizenship. Watch out for predatory lenders, though, who might take advantage of your financial vulnerability. They would still offer you a loan even if you are unable to pay the mortgage because of the FHA guarantees on loans. This is illegal, and is something that you need to notify the US Department of Housing with.
With the help of FHA mortgage loans, you can take advantage of a home loan with a low down payment; you can apply for one even if you do not have a glowing credit score; and you can select a home which fits your budget to a tee. Learn more about the requirements of the FHA so that you can take advantage of this once-in-a-lifetime opportunity to have a home of your own.
