When it comes to mortgage loans, there are many different kinds; it can be overwhelming at times, especially if you are a first-timer in such. However, once you get to know the basics about each, you will find them dull.
There is two primary mortgage loan classification, we have conventional loans, and we have the government-insured loans. If given a chance, most will choose the latter as it has many advantages; however, not everyone is qualified. Thus, most go for the conventional one. Conventional loans are accessible since you can get approved quickly as compared to government loans. On the other hand, government-insured loans are advantageous since they offer good repayment terms, low-interest rates and low down payments too.
One of the most popular types of government loan is the FHA loan. It is an interesting one since it can make everything easy and convenient for you once you get approved for it. If you are interested in learning more about FHA Loans Fort Worth, then read through this article.
FHA Loan Defined
FHA loan is a type of mortgage loan offered by the Federal Housing Authority (FHA). It is a government-insured loan; thus, it comes with many benefits. One of the best things about FHA loan is the down payment. It offers one of the lowest down payments for all mortgage loans at a minimum of 3.5 percent. In addition to that, they also have a lower credit score requirement at 580 as compared to the standard 680 for most mortgage lenders. However, it also comes with a downside. You may have low-interest rates as well as a low monthly payment, but you are required to pay for mortgage insurance premiums. It is to ensure the protection of the lender in case the loan will default.
FHA Loan Requirements
Every loan has its requirements; however, most of their demands are the same. FHA loan is one of the few though with a lot of elements. One of the first requirements for this loan is for the borrower to have a valid Social Security Number. It means, only those with US citizenship are allowed to apply for the loan. You are also required to have maintained sound and stable employment with the same company for the last two years. Thus, if you are starting with a company, you need to wait for it first. Another stringent requirement is the back-end ratio. The demand for FHA loans must be at 43 percent and below of your gross income. There are several instances when 50 percent is granted but that is the maximum, and it is for exceptional cases only.
FHA Loan Benefits
FHA loans as mentioned earlier comes with many benefits. One of the most popular interest is, of course, the low down payment. Through it, more people can purchase their own homes. Another significant benefit is the low credit score requirement. Unlike other loans, it has a much lower specification, thus it can even allow those who are trying to fix their credit scores and those who are trying to build theirs.