{"id":35,"date":"2022-08-10T23:54:03","date_gmt":"2022-08-10T23:54:03","guid":{"rendered":"https:\/\/wikipedy.com\/?p=35"},"modified":"2023-04-22T22:24:49","modified_gmt":"2023-04-22T22:24:49","slug":"a-closer-look-at-fha-loans-the-good-the-bad-and-the-ugly","status":"publish","type":"post","link":"https:\/\/wikipedy.com\/a-closer-look-at-fha-loans-the-good-the-bad-and-the-ugly\/","title":{"rendered":"A Closer Look at FHA Loans: The Good, The Bad, and The Ugly"},"content":{"rendered":"\n
The Federal Housing Administration has made homeownership easier for the average American since 1934. While the agency does not lend money to borrowers, it guarantees the loans made under the FHA loan program to protect lenders from losses. The FHA loans have been the go-to home loan financing for first-time homebuyers<\/em><\/strong><\/a> and low-to-moderate income households.<\/p>\n\n\n\n If you\u2019re considering an FHA loan to finance the purchase of your new home, there are some essential details you need to know about the program.<\/p>\n\n\n\n Let\u2019s take a closer look at the different sides of FHA loans \u2013 the good, the bad, and the ugly,<\/p>\n\n\n\n Because the HUD insures FHA loans, they are offered with less stringent qualifications than most home loans. FHA loans have lower credit standards, higher allowable debt-to-income ratio, and no maximum nor minimum income requirements.<\/p>\n\n\n\n Most conventional plans require at least a 5% down payment and, depending on credit, up to a 20% down payment. With FHA loans, you\u2019ll only need a 3.5% down if your credit score is 580 or higher. Credit scores below 580, however, will necessitate a higher down payment.<\/p>\n\n\n\n Also, when you apply for an FHA loan, you have several options for sources of down payment. You can use personal savings, gifts from family members, or approved government down payment aid programs to pay for the down payment.<\/p>\n\n\n\n FHA loans allow property sellers to pay up to 6% of the purchase price toward closing costs and other fees involved with securing the loan. When a borrower pays less than 10% down on a conventional loan, seller contributions <\/em><\/strong><\/a>are limited to 3%. This raised threshold can lower your out-of-pocket expenses when buying a home.<\/p>\n\n\n\n After a bankruptcy or foreclosure, you can qualify for an FHA loan in as short as two and three years. As a borrower, you must reestablish solid credit or opt not to incur new credit commitments and demonstrate your capacity to handle your financial affairs.<\/p>\n\n\n\n There is a limit to how much you can borrow with an FHA loan, based on the location of the home you wish to buy. This could be a problem if you live in areas with the most expensive housing markets in the country.<\/p>\n\n\n\nTHE GOOD:<\/h2>\n\n\n\n
FHA loans are designed to make homeownership more attainable.<\/h3>\n\n\n\n
FHA loans require a lower down payment than most mortgages.<\/h3>\n\n\n\n
FHA loans have higher allowances for seller concessions.<\/h3>\n\n\n\n
FHA lenders qualify applicants with records of bankruptcy or foreclosure.<\/h3>\n\n\n\n
THE BAD: <\/strong><\/h2>\n\n\n\n
The FHA sets limits on how much you can borrow.<\/h3>\n\n\n\n