Exploring Mortgage Options: FHA Loans

Most people who buy a home—especially for the first time—require some kind of financial assistance to make the purchase happen. For first-time home buyers, this can be difficult, as saving up money for a down payment on a home isn't an easy task. Fortunately, there are mortgage options available that can make getting into one's first home a lot easier. An example of one of these mortgages hanover home buyers is the Federal Housing Administration (FHA) loan. Small Required Down Payment Perhaps the biggest draw of an FHA loan for first-time buyers is the fact that they require only a very small down payment percentage. In most cases, those approved for an FHA loan end up being required to pay no more than 3.5% on the total sale price of the new home. Of course, it is always better to place a larger down payment up front since it will reduce interest paid in the long run, but for those who cannot necessarily afford a 20% down payment, this can be a great benefit.

Competitive Rates and Loan Terms In addition to the small down payment requirements, FHA loans are also known for being quite competitive in the real estate market when it comes to interest rates and overall loan terms. Of course, the interest rate that a borrower ultimately ends up with will vary based on one's credit score and current financial situation. However, FHA loans also have reasonable and quite flexible loan terms, so buyers can decide between anything from a 10-year mortgage to a standard 30-year one.

Simple Approval Requirements There isn't a whole lot to getting approved for an FHA loan, either. In most cases, so long as one has a decent credit score and a reasonable debt-to-income ratio, approval is relatively straight-forward. However, the specific dollar amount one is approved for will vary based on a number of factors, such as total household income. Quick and Easy Closing Finally, FHA loans are pretty simple in the sense that once a person is officially approved for one, there is typically no problem with closing on the real estate transaction and getting everything finalized in a timely manner.

This is ideal for many first-time buyers who are excited to get the keys to their first place and don't want to be stuck playing the waiting game while trying to close.