FHA is a home loan program where PMI is provided with federal funding. Most major lenders offer the program. Although the program is often utilized by first time buyers, it is not limited to them. This blog includes PA FHA Home Loan Program Overview and pre-approval guidance to help you determine whether it is a home loan program that you may want to consider.
Benefits Of FHA Financing
There are many notable benefits of FHA financing. The lowest down payment for FHA loans is 3 percent, which satisfies buyers who do not have a larger down payment. They also permit borrowers to use gift money for the down payment and closing costs. An additional benefit is the simplified refinancing option. It allows borrowers to refinance to a better payment without obtaining a satisfactory appraisal, which is helpful during declining markets. The mortgages may also be assumed, meaning that a new buyer can take over the loan at the fixed interest rate (if that person qualifies). This can help if interest rates are on the rise. Lastly, FHA does not penalize buyers for FICO rankings. Although buyers must still have satisfactory credit, higher interest rates do not result from lower scores.
Downsides Of FHA Financing
There are downsides of FHA financing to consider. FHA mortgage insurance (MI) is historically higher than a conventional loan. There is a one-time lump sum fee and a monthly amount due each month for the life of the loan. For condo units, the complex must satisfy certain requirements such as minimum reserve funds and certain owner occupancy levels. Most converted buildings may be unlikely to get approved. Single family houses must also meet specific safety requirements.
FHA Pre-approval Guidance
Before requesting a pre-approval, get a copy of your credit score and address any issues. Also obtain important financial paperwork such as bank statements, tax filings from past years, current pay stubs, and investment account statements. Banks will routinely ask for these documents. Consult with a mortgage professional to receive potential monthly payments (based on a specific home price and your financial qualifications) and closing fees prior to getting too far in the process.
PA FHA Home Loan Program Overview
FHA makes a home purchase achievable for some home buyers who may otherwise not be able to get a mortgage. It can also make refinancing or selling a home less complicated if rates dramatically change. However, there may be higher fees and property-specific requirements, so not everyone can or will want to select an FHA mortgage. Contact an FHA loan professional to fully understand this option.