Many people buy home the first time and are looking for low down payments and interest rates along with the qualifying standards. They want a government-approved lender to render home loans Texas services at best rates. FHA or Federal Housing Administration Home Loans is a type of loan that comes with easy qualifying standards. The FHA is a vital part of the U.S. Department of Housing and Urban Development (HUD).
FHA particularly does not make a loan, but the FHA approved lender according to the guidelines set by the Federal Housing Administration provides it. If there is any kind of fault by borrower, then FHA protects the lender in the event of any loss. The FHA is providing federal assistance to the moderate and low-income homebuyers by guaranteeing their loan.
5 Facts You Need to Know About FHA Home Loans
If you are residing in the US, then you need to acknowledge the FHA Home Loan Requirements stated by the government authorities. You can also search for the top mortgage lenders in Texas if you are willing to buy your home in the city or suburbs of Texas State. Below are some vital facts that you need to seek now:
- Lower Amount of Down Payment
FHA insures more than 34 million properties by using the self-generated income instead of using the taxpayers’ money. If you are a resident of Texas and looking forward to buying a home, then you can avail home loans Texas at minimal down payment just by paying 3.5% of the purchase price. Many traditional loans want the buyers to pay around 20% of the down payment, which is not the case with the FHA-approved home loans.
The first-time homebuyers, college students, people with low to moderate income or the newlyweds cannot afford this huge down payment on their property. Even if you are facing the issue of foreclosure, bankruptcy, or possess the minimum cash investment, then also you qualify for the FHA home loan. The buyers can receive this home loan as a gift from the family member, charity or the employer that is impossible in the case of conventional loans.
- Does Not Have Higher Rate of Interest
Along with the lower down payment the homebuyers also pays lower interest rates on the FHA home loans. These are guaranteed loans by Federal Housing Administration. Moreover, the experts have stated about types of FHA loans with their interest rates that provide an insider’s view.
One thing worth noting here is that FHA does not directly finance the loan or determine the rate of interest upon them as they just provide a guarantee in the event of default. The interest rate will only be negotiated with the FHA approved lender in your city. The homebuyers can look out for top mortgage lenders in Texas and compare the interest rates before finalizing any one of them.
- Easy to Qualify Loans
These are easy to qualify loans, as there are no minimum credit score requirements set up for the FHA home loans. From June 2013, the government authorities have made FHA to sign the documents and take the liability of the buyers who have a credit score less than 620 and their debt-to-income ratios are higher than 43%.
The homebuyers with bankruptcy history or low credit scores can easily qualify for the FHA approved home loans under certain guidelines. The FHA experts have provided a detailed guideline about the credit scores and the loan requirements that you can refer in the present year. Even if the buyers do not have any credit history to calculate the credit score, then other payment records are checked for the evaluation purpose. If you were a part of the credit-counseling program for more than a year and paid all other expenses timely, you still get approval for the FHA home loan.
- FHA-Approved Lender can Pay the Closing Costs
If you are worried about your closing cost, you need not to worry anymore as FHA allows the sellers to pay up to 6% of the closing cost in lieu of the borrower. This needs to be negotiated prior to signing the purchase contract for your house. The average closing cost ranges between 2% to 4%. In case, the seller is not paying the closing cost, it is rolled into the home loans Texas amount and buyers do not have to pay them straight.
Here, the home loan lender must be FHA-approved, as Federal Housing Administration is just an insurer and not the lender of the loan amount. The buyers should note that not all FHA-approved lenders provide the same rate of interest on the same FHA home loan amount. The costs, underwriting standards, and services vary amongst the mortgage lenders, so you need to research wisely before choosing particular FHA lender.
- Avoiding the Event of Foreclosure
The FHA came into force to help the homeowners who cannot afford a home loan due to many circumstances or financial setback situations. The US Government also started the Making Home Affordable Program or MHA to assist the first-time homebuyers or the financially weak buyers. Many homeowners are having the default on their existing mortgage value too. In this event, the MHA program supports the buyers in reducing the loan payments that lead to avoiding the situation of Foreclosure.
There are many options to aid the unemployed homebuyers or the property owners who are stated to be ‘underwater’. The ‘Underwater’ is the situation where the buyer owes more amounts on their mortgage than the present worth of their house. You need to take assistance from your lender to explore the options that are set under the MHA program.
If you are residing in any of the US States and have a lower credit score or weak financial position, then FHA Home Loans can save you from most of the financial situations. Moreover, you can hire top mortgage lenders in Texas who are professionally sound and abreast with the present guidelines of the FHA home loans. The experts with greater experience can guide you in a better way.