FHA means Federal Housing Administration. Learn everything about its loans by reading this FHA loans review.

FHA and its goal is to increase homeownership in the U.S. through an accessible and affordable mortgage program.

It is designed to attend first-time home buyers, mainly those with a poor credit score who couldn’t apply for traditional lenders.

Although it requires insurance, as the lower credit score and smaller down payment you have and make, it is still more accessible than other loans in the market.

So, check out how it works so that you can start dreaming about your own home!

You must first know that an FHA loan requires FHA mortgage insurance. This insurance is a way to protect the lender if you don’t accomplish paying your mortgage.

They also call this insurance mortgage insurance premiums. If you manage to pay 20% of your down payment, you can avoid the insurance.

However, this is high, so most borrowers stick with the insurance.

Then, you will pay two premiums in this case, one upfront, which requires 1.75% of the total amount in upfront mortgage insurance. And one annual, which is divided by 12 so you will pay for it month by month.

This insurance will continue unless you finish paying all your due or refinance using a conventional loan to eliminate this cost.

Even though FHA focuses on first-time buyers, you don’t necessarily need to be one to qualify for a loan.

The main benefit of it is that you can qualify with a down payment of as little as 3.5% for a credit score of 580 or higher. But, the better deal you will have if the higher credit score you have.

The main feature of this loan is that you can apply even with a poor credit score. Even though the rates won’t be the lowest, it is still accessible and affordable compared to conventional loans.

Also, it is designed especially for first-time buyers. 

On the other hand, the downside is that it requires insurance to protect the lender. The only way to avoid it is to pay 20% of your down payment, which is pretty high.

FHA loans are a good option if you qualify as a first-time homebuyer with a lower credit score. Otherwise, it would be best if you looked for conventional loans.

Borrowers must have a steady employment history, a valid Social Security Number with two years out of bankruptcy.

People with a minimum credit score of 500-579 need a minimum down payment of 10%. And people with a 580-score need a minimum down payment of 3.5%.

Furthermore, new FHA loans are available for first-time homebuyers only.

Read the terms and conditions before applying for a loan.

FHA accepts poor credit scores. But, the higher the score is, the better deal you can get.

Now, learn how to apply for a loan with FHA.