FHA Loans are mortgages that are insured by the federal government. This indicates that if the borrower defaults on the loan that the government-based insurance pays the lender and prevents a loss. For this reason, most lenders do not impose high restrictions. This opens the door to a wider market of borrowers who wish to utilize these loans to acquire a home. If you wish to explore your options, you should contact Village Mortgage today.
Down Payment Requirements
In most cases, the borrower pays a lower than average down payment to secure the loan. Usually, the required amount is three percent of the total mortgage value. Most mortgage loan products require no less than five percent. Conventional loans, however, require the borrower to pay twenty percent down. The borrower’s income and credit rating may also affect the total down payment required.
Insurance Fees are Reduced
FHA Loans do not require as high of insurance fees as other loan products. You will pay a significant amount lower by choosing these mortgage loans instead over a conventional mortgage. The restrictions for these loans are not as extensive as with traditional choices. This could reduce your expenditures before closing as you are required to possess a policy at this time.
Lower Interest Rates
Conventional mortgage loans are not insured and could present a profound probability of loss for a lender, as they are not insured. For this reason, borrowers are impacted by higher interest rates, which could significantly increase your monthly payments. This is not the case for borrowers who choose an FHA loan.
Affordability Requirements for Mortgages
According to the new lending laws in the U.S., lenders are required to establish affordability before providing a mortgage to a borrower. They must evaluate the consumer’s income to debt ratio to make this distinction. With an FHA loan, the borrower can be as much as twenty-nine percent.
Prospective home buyers can acquire a mortgage if they choose the right loan program. Your selected lender can present you with information about each opportunity available to you. This could include a loan option that will present you with fewer restrictions and allow you to qualify even if your credit isn’t perfect. If you wish to explore your options today, you should visit the website now.
©2014 Village Mortgage Company, NMLS #6331 , CT #6331, RI #6331, Mortgage licensed lender in MA ML6331. This is not an offer to extend credit to any individual who may be entitled to a more complete disclosure per RESPA, TILA, HOEPA or any other more applicable federal, state or local law or regulation. Rates, terms, fees, products, programs and equity requirements are subject to change without notice. Village Mortgage, Equal Housing Lender.
