So, what exactly is an FHA loan? FHA stands for Federal Housing Administration, which provides mortgage insurance on loans made by FHA-approved lenders, like Southern Trust Mortgage! They are designed to help you buy a home with looser financial requirements. This makes FHA mortgage loans a great option for first-time homebuyers, borrowers with debt, and those with a less than perfect credit score.
There are certain requirements borrowers must meet to qualify, such as:
- The home must be appraised by an FHA- approved appraiser
- You must occupy the property within 60 days of closing
- The home cannot be an investment property
Now that you know a bit about the FHA mortgage, we’re going to highlight the top 3 benefits of choosing one!
Lower Down Payment and Credit Requirements
FHA loans have lower down payment and credit requirements for qualified home buyers, making them a fan favorite. The minimum down payment on an FHA mortgage is just 3.5%, which under certain circumstances can be subsidized with an affordable second lien; sometimes forgiven and sometimes not depending on the program you qualify for.
Additionally, applicants only need to have a 600-credit score to snag the lowest down payment options offered here at Southern Trust! How’s that for a good deal?
Closing Cost Assistance May Be Available!
Closing costs are typically a necessary evil during the home buying process, however there are ways to relieve some financial stress at the closing table if you’re applying for an FHA loan.
Some options include, seller funded closing costs which are credits from the seller given at closing and lender credits which are events where the borrower pays a slightly higher interest rate, and in return, the lender gives them a credit that helps cover their closing costs.
If you’re interested in having some of your closing costs covered, let your Southern Trust loan officer know and they can work out the numbers for you!
Past Bankruptcies & Foreclosures? You Can Still Qualify!
You heard us! Having a past bankruptcy or foreclosure can make getting a mortgage more challenging, and it may feel like you don’t have many options. With an FHA loan, you don’t have to wait nearly as long to qualify for a home loan after a negative credit event as opposed to conventional loan programs.
The chapter 7 bankruptcy period for FHA loans is just 2 years since discharge, and the foreclosure waiting period is only 3 years from recorded deed transfer. This is compared to 4 years post-bankruptcy and 7 years post-foreclosure for conventional loans!
Therefore, long as you meet the FHA guidelines, it is possible to still get a home loan.
As you can see, there are quite a few benefits to an FHA mortgage loan. These days, homeownership is becoming more easily accessible than ever before thanks to loan programs like the FHA mortgage!