In our new, down economy, purchasing a home seems like something that very few people can now afford to do. Conventional methods of saving for a down payment and applying for a mortgage loan appear to be luxuries that only a select few can afford. How are people supposed to purchase housing if they are unable to qualify for a loan?
There are many types of loans available to the public that are safe, quick and best of all, insured by the government to avoid another housing fallout like the one experienced a few years ago.
An FHA (Federal Housing Administration) home loan is one of the best ways to get a home if you have subprime credit or a lower income. You can read a brief description about FHA home loans on the government housing site here. An FHA loan is simply a loan that does not require mortgage insurance from a private company, because the loan itself is insured by the government. Typically monthly payments on FHA loans will be slightly cheaper than conventional mortgage rates. This also enables the FHA to extend certain perks to those with FHA loans, such as the 12-month extension explained in this article by MPR News.
Interest rates on FHA home loans are generally slightly higher, usually by .125% to .250%, because the government needs to recoup the cost of insurance somehow. So while an FHA loan has lower monthly payments, overall the cost of the home will be the same as compared to a conventional mortgage with lower interest rates.
FHA Home loans won’t work for everybody. Some of the qualifications include a cap on home price, stringent appraisal guidelines and qualifications, and the need to work with an FHA approved lender, which are more difficult to find than conventional lenders. FHA Home loans boast some great benefits, however, which are explained in detail on this page at about.com. Subprime credit, competitive rates, and low repair demands are all perks of government insured loans.
Whether you can afford a conventional loan or think an FHA loan is a good option for you, you can get some great advice at the website for the Department of Housing and Urban Development. The best way to get started is to learn about all the qualifications and benefits and see what will benefit you most.