Benefits of FHA Loans
St. Patrick’s Day, officially referred to as the Feast of Saint Patrick is held every year on March 17, the day of St. Patrick’s death in 461 AD. And whether you’re “unofficially” Irish or celebrate St. Patrick’s in a more serious manner, it seems everyone is wearing green that day.
And we all know the reason we wear green and it’s because we don’t want to get reminded we’re not and get a friendly “pinch” from a friend or co-worker. There’s definitely a benefit having green in your wardrobe on that day. And just like wearing green on St. Patrick’s Day has its benefits, so too do FHA loans. What are the benefits of an FHA loan?
One of the reasons so many first time buyers use an FHA loan to buy and finance a home is the low down payment required. FHA loans only ask for a down payment of 3.5% of the sales price. Unless you’re eligible for a VA home loan there’s probably not a better option than the FHA choice. Anyone can apply for an FHA loan regardless of previous service.
FHA loans also carry an inherent guarantee toward the lender. Approved FHA lenders like making these loans and one of the reasons is this guarantee that is included with all FHA loans. If the loan ever goes into default the lender is compensated for the loss as long as the loan was approved using FHA guidelines. This guarantee is funded by an upfront mortgage insurance premium that is rolled into the final loan amount and an annual premium that is paid in monthly installments.
The down payment and closing costs do not have to come from the buyer’s own funds. FHA guidelines allow for a family member or qualified non-profit to provide all or part of the funds needed in order to close on an FHA loan.
Finally, FHA loans allow for the presence of an unoccupied co-borrower’s income to be used to help qualify. This is especially helpful when buyers expect an increase in income down the road but for right now need a little help qualifying.