For many first time-homebuyers and others with specific requirements, the FHA loan is one of the most beneficial out there. If you're a prospective Federal Way homebuyer interested in this program, the David Reitze team at Primary Residential Mortgage is here to help.
We've assisted numerous clients with their entry into homeownership through FHA financing, and we're confident in our ability to do the same for you. An FHA loan is a home loan that is insured by the Federal Housing Administration (FHA). Read on to learn more about it, or contact our team at your nearest convenience to learn if it might be right for you.
FHA Loan Basics and Benefits
FHA loans refer to two different kinds of financing: mortgages and home improvement loans. Here, we'll focus on FHA mortgages. An FHA mortgage is a loan that is insured by the Federal Housing Administration and is available to first-time homebuyers as well as those who may have previously filed for bankruptcy or have otherwise been deemed high-risk borrowers by traditional lenders.
There are some major benefits associated with FHA loans, including:
- Lower credit requirements: Compared to other kinds of loans, FHA loans have notably lenient credit requirements. If your credit score is as low as 580, you may still be able to qualify for an FHA loan.
- Lower down payment requirements: FHA loans only require a down payment of 3.5%, making them a great option for first-time homebuyers who may not have the funds for a larger down payment.
- Flexible income requirements: There is no minimum income requirement to qualify for an FHA loan, which makes them a great option for those who may not have steady employment.
FHA loans are available in both fixed-rate and adjustable-rate varieties, giving you the flexibility to choose the mortgage that best suits your needs.
FHA Mortgage Insurance
One element that should be considered by anyone taking out an FHA loan is mortgage insurance. Mortgage insurance is required for all FHA loans and protects the lender in the event that you default on your loan.
There are two types of mortgage insurance: private mortgage insurance (PMI) and mortgage insurance premium (MIP). PMI is typically required for conventional loans with a down payment of less than 20%. MIP, on the other hand, is required for all FHA loans and cannot be removed even if you have 20% equity in your home.
While PMI can be removed once you've built up enough equity in your home, MIP remains with the loan for its entirety. As such, it's important to factor MIP into your budget when considering an FHA loan.
For more on FHA loans, or to learn about how our team will help with everything from your mortgage application to closing time, speak with the David Reitze team at Primary Residential Mortgage today.