This series has been designed with our homebuyers in mind. Regardless if you are a first-time or veteran buyer, the first step of the home buying process often involves shopping for a loan. This process is not always as simple as it sounds! Which types of loans are there? What is the difference between them? Which loan is best for you? Through this new series, we will help you navigate through those questions and the loan process, breaking down the most common loans that we deal with here at Nashville On The Move.
Week 4: FHA Loans
The basic FHA Loan (203) is a fixed rate loan insured by the Federal Housing Administration (FHA) allowing a minimum down payment, which is 3%. Essentially, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments. The maximum loan amount insurable by FHA varies according to the region. Buy down features and adjustable rate provisions can be applied to FHA loans.
The FHA program was created in response to the rash of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with adequate insurance; and to help stimulate the housing market by making loans accessible and affordable. Nowadays, FHA loans are very popular, especially with first-time home buyers.
- Low Down Payment Requirements
- Long Tern, Fixed Rate, Fixed Payments
- Good Loan for First Time Buyer
- Easier Underwriting Guidelines
- Can Borrow Against Your 401K and Debt Will Not Be Counted Against you
- Higher Debt to Income Ratios are Allowed
- Loan is Fully Assembled: Qualifying, Non-Escalating
- ARM Available with 1% Annual Cap
- Down Payment Can All Be From A Gift
- Loan Processing is More Complex – Can Take Longer to Close
- Maximum Loan Amount Can Limit Price of House in Some Areas (However, More Can Be Put Down)
- Mortgage Insurance Premium is Required
Thanks for tuning in to our Home Loans 101 blog series! | Next week: Preparing for a Loan Application | Want to stay connected? Like us on Facebook + follow us on Twitter and Instagram. And, as always, check out our current homes for sale in the Nashville area.