An ever-growing number of Americans are transitioning from being renters to homeowners these days. An estimated seven million people purchased homes last year, the highest number on record over the last decade. That figure is projected to continue rising during the coming years. Several types of home loans are available for potential buyers, but not everyone qualifies for all types of mortgage loans. For many, though, FHA loans are the optimal solution.
What Is An FHA Loan?
FHA loans are one of many mortgage solutions available to hopeful homebuyers. They’re provided by the Federal Housing Administration. Unlike other loans, they’re backed by the federal government. Those interested can click here for more details about these types of loans. In the meantime, take a look at some of the benefits of using this resource to purchase a home.
Reasons an FHA Loan May Be the Best Solution
Numerous people are turning to FHA loans to help them become homeowners, according to realtimecampaign.com. They’re popular among first-time buyers and repeat homeowners alike. They tend to be more affordable and accessible than other home loans, which means they give more people an opportunity to purchase a home.
More Lenient Credit Requirements
Most lenders have strict credit requirements when it comes to providing any type of financing. In terms of home loans, many lenders expect borrowers to have established borrowing histories and credit scores of at least 620. Those prerequisites automatically disqualify many mortgage applicants. For FHA loans, prospects can often borrow with credit scores as low as 500.
Lower Down Payments
Borrowers also find that FHA loans require lower down payments than other mortgage loans. Depending on their credit scores, borrowers may only need to come up with 3.5 percent of the total value of the home. Those with lower credit scores may need to provide a 10-percent down payment, but they’re also allowed to use monetary gifts from friends and relatives to help.
Bigger Selection of Homes
In the past, some people who were exploring their FHA loan options found that the selection of qualifying homes was a bit limited. That has changed in recent years. California REALTORS® commend FHFA for raising Fannie Mae and Freddie Mac conforming loan limits because doing so has brought an even broader selection of homes to the mix for borrowers.
Saving Money on Closing Costs
Another advantage of FHA loans is the potential for saving money on closing costs. With traditional mortgage loans, borrowers have to come up with as much as five percent of the amount of the loan to cover closing costs. That can be a major hurdle. Those who acquire FHA loans through companies like Capstone Direct may be able to add some of their closing costs to the loan itself so borrowers don’t have to provide extra money upfront.
Becoming a Homeowners with an FHA Loan
While many types of loans are available, countless homeowners have found that FHA loans are the best choice. They allow more people to become homeowners due to their less stringent credit requirements. They also don’t require the same lofty down payments as other mortgage loans. At the same time, the closing costs could be lower with these types of loans. Those benefits alone have led many people to turn to FHA loans to help them become homeowners.