FHA loans are specifically designed for first time home owners and these are people who intend to buy their first homes through funds that have been acquired via bank loans. One notable aspect about these types of loans is that they are also characterised by certain conditions that should be fulfilled by the applicants before their loan applications are approved by financial lenders.
Conditions required by applicants toqualify for FHA loan
The major important aspect that is considered for one to qualify for fhaloan like any other loan in general is good credit history. This includes a clean record about the applicant’s previous loan transactions as well as bill payments which should be up to date. The applicant also needs to have a good credit score as determined by different credit rating agents who responsible for compiling this information about different clients.
First and foremost, it should be noted that applicants who are interested in getting FHA loans should have a minimum FICO score of 580 which gives them the advantage of qualifying for a down payment of 3.5 %.However, the applicants with lower rates than 580 as determined by FICO can still qualify for fha loans but on condition that they need to pay a bit high down payment of 10 % of the loan applied. This implies that the applicants should have sufficient funds to cover the required down payment of 10 % if they are still interested in getting fha loans despite their bad credit scores.
Benefits of FHA loans
There are quite a number of benefits that can be enjoyed by FHA loan applicants which are not offered by other lenders. These include the following:
- The agency insures all FHA loans implying that the lenders are a bit lenient on the borrowers since they are also protected. They do not risk experiencing huge losses in the event that the borrowers default in the repayment of their loans as a result of different reasons.
- FHA loans are characterised by low interest rates and other related fees that are often charged by lenders on all approved loans. The low interest rates are designed to cushion the home owners from stringent repayment conditions that are imposed by other subprime loan lenders.
- It is also easier to qualify for an FHA loan since applicants with a bad credit history can still qualify for the loans.
- Even people who have previously filed for bankruptcy can still qualify for FHA loans as long as they are capable of satisfying the requirements of FHA. To those with no credit history, they can also qualify through the use of a substitute form.
Above all, fha loans are suitable for all first time aspiring home owners since the conditions required by the lenders are quite flexible compared to those set by other lenders. The minimum FICO credit score for fha loans is just 580 compared to 640 which is demand by other subprime lenders.
More importantly, even people with low credit scores can still manage to get fha loans as long as they are capable of proving their credit worthiness to the lenders by paying a down payment upfront of 10%. The other issue is that the interest rates are generally lower which can help the first time home owners to repay their loans without facing complex challenges which can result in them failing to meet their repayment obligations.