How can you find the best lenders in Houston, if you don't know about FHA loans properly? Read below to have a better understanding of FHA loans.
Do you know everything about FHA loans? Most people know that FHA loans are housing loans insured by the Federal Housing Administration, and nothing else. But, do you have a proper understanding of federally backed loans? Not much I guess.
The federally backed loans ensure the lenders that the government will pay the loan, in case of any defaults. FHA doesn’t fund the loans directly, instead, they find some lenders to fund on their behalf.
When you start looking for a lender, check their fees and interest rates, as it can vary between one lender to another. But, before finding the Best FHA lenders in Houston, here are some things mentioned below about FHA loans, that you should know.
- Low Down Payment
If you qualify for an FHA loan, you will only need to put in a 3.5% down payment. But, the money you put in for the down payment should be traceable. This means the money has to be in a savings account or any investment account for the last two months.
The lender will not accept payments in cash or any other untraceable form. The down payment can be from a friend or relative. If you don’t have anything to put in as a down payment, they can give you money or equity.
- Mortgage Insurance Required
If you are putting in less than a 20% down payment, you have to do mortgage insurance. The mortgage insurance is for the lender’s safety, in case you default on the loan.
The insurance covers almost 25-30% of the total loan amount. Therefore, the lenders can resell the property and recoup their losses if you fail to pay.
- The Seller Pay The Closing Costs
The seller can help you by paying 6% of the closing costs, as per FHA rules. This means as a buyer, you only need to pay the down payment. This is one of the most favorable options for first-time homebuyers because the buyer gets the help he needs to pay the closing cost.
- Refinancing Program of FHA
There are refinancing options for borrowers. If you are already paying an FHA loan, you can consider streamlining the refinance process. However, you must have had the loan for at least 210 days and paid a minimum of seven repayments to qualify for the FHA streamline program.
- FHA Loans Are Not Limited to First-time Buyers
Owing to their flexibility and benefits, FHA loans are preferred by first-time homebuyers, but they are not limited to first-time buyers only. This loan program helps all the buyers. The homeowners can also purchase another using the FHA loans, provided you to make it a primary residence.
FHA loans provide a lot of benefits to both the buyers and lenders, and therefore it is most applauded by the homebuyers. Now that you know about all the things about FHA loans, you can find the perfect lender. However, you must check the interest and fees provided by different lenders, before setting for one.