Real Estate Journal Online
October 1, 2010
The federal home buyer's credit may have been canceled last April, shattering the dreams of many who wish to own a home for the first time. The Federal Housing Administration, though, comes to the rescue and gives them hope. With FHA loans, which are originally meant for purchasing or refinancing owner-occupied residential properties, manufactured homes, and condominiums, can also be utilized to purchase your first home.
The Federal Housing Administration's guidelines are not that strict that anyone, as long as they qualify under the agency's requirements, can avail of the loans. FHA loans, which are not actually funded by the FHA, act as guarantee that loans will be repaid even when borrower defaults.
Whereas traditional loans dwindled during the economic crisis, FHA loans continued to thrive making them extremely popular with first-time home buyers. What makes FHA loan more attractive to first-time home buyers is that fact that, amidst the failing economy and the breaking down of the mortgage market, it is still easier to secure compared to regular conventional loans.
Being one of the more lenient loans, an FHA loan can approve anyone as long as borrower has no other mortgage and meets the requirements. FHA is very understanding of certain financial situations that it even approves a loan even just two years after bankruptcy is declared. The only time one cannot be eligible for an FHA loan is when he has federal liens or defaults on student loans.
Perhaps one of the biggest attractions of an FHA loan is its credit score of 620 when putting down minimum 3.5%. This is way below the conventional loan requirement of a 720 or higher credit score.
Even the amount needed at closing is seen as a big advantage of an FHA loan. At least 20% is needed at closing for conventional loans and most first-time home buyers just don't have the funds to meet this. For FHA loans, only 3.5% is required at closing.