It can be very difficult for renters to make the transition into owning their own home. New homeowners are very rarely able to just buy their house outright. Instead, they have to get financial assistance. One of the most popular options for new homeowners is to get a FHA loan. The US Federal Housing Administration issues the FHA loan. The loan was first introduced back in 1934. It was established primarily to assist lower-income families.
About the Required Down Payment
Low-income families are often unable to afford the down payments offered by other plans. Since the FHA loan was designed with lower-income families in mind, the down payment is considerably lower than what most banks offer. For the FHA, the down payment can be as low as just 3.5% of the total cost of the house in question. In comparison, most other loans will have a down payment around roughly 20%. There are even some options available that can reduce the down payment all the way to 3%. The applicant’s credit score is ultimately going to determine the final down payment.
· If the credit score is 580 or higher, than the applicant will be eligible for the 3.5% down payment
· If their credit score is between 500-579, then their down payment will be set at 10%
Learn About Mortgage Insurance
The FHA loan doesn’t have the same standards of conventional loans, but there are a few requirements that applicants need to be aware of. To get the FHA loan, applicants have to get a couple of different kind of mortgage insurances. One of these mortgage insurances will need to be paid in full upfront. If the applicant is unable to pay it upfront they have the option of having the fee financed into the mortgage. The other premium will be needed to be paid every month. The payments themselves vary depending on the size of the loan and the length of the loan. More information about getting a FHA loan and the different payments are available online.