FHA loans are an attractive option, especially for first-time homeowners because it is insured by the Federal Housing Administration (FHA). Primarily, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments.
Typically the borrower can be approved with 3.5% down vs 20% that is required on other loan programs.
Qualifications for FHA loans allow for lower credit scores going as low as 500, and those with a considerate amount of debt with regards to there income (up to 50%)
Also with FHA loans, properties must meet certain health and saftey standards, this being more stricter. For example, there may be multiple appraisels to ensure that the property suits a good investment.
Private mortgage insurance (PMI) is required for FHA loans. Generally, with downpayments below 10%, PMI is charged for the entire life of the loan. On the other hand, if making 10% or more on a downpayment, the duration of paying PMI would last for 11 years.
If you’re a first time homebuyer, and don’t meet the criteria for conventioal loans, ArmCor will be glad to help you!