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Why FHA Is A Great Loan


Written by Laura Giuliano

In 1934, in response to the Great Depression banking crisis and subsequent lack of home financing sources, the Federal Housing Administration was created. Its intention was to regulate the rate of interest and terms of mortgages that it insured. Before this time, mortgages were usually short-term (three to five years) and required huge down-payments (40%). This new agency dramatically increased the number of people who could afford a home, thereby also increasing the size of the market for single-family homes. Interestingly, FHA loans became widely popular again after the most recent market crisis for the same reasons.

Why should you consider a FHA loan?

-Low down-payment of 3.5%

-Down-payment and closing costs can be 100% gift

-Reserves not usually required

-Lower, subsidized interest rates

-Set mortgage insurance rates which don’t increase with lower credit scores.

-Credit scores allowed as low as 550 (10% down required if score is in between 550-579)

-Forgiving guidelines regarding less-than-perfect credit and job history.

-Close family members can be "non-occupant co-borrowers" to allow even borrowers with no income at all (example: students needing housing) to qualify and be on the mortgage building credit.

-FHA loans are assumable by qualifying buyers down the road.

FHA loans aren’t the right loan for everyone, such as buyers with high credit scores, larger down-payments and reserves in the bank. However, for those that are just starting out, starting over or have credit issues that prevent them from using conventional financing, FHA is a wonderful tool!

Call your favorite Blue Adobe Mortgage Loan Officer for more questions.

The loan program referenced is subject to Summit's program minimum FICO and underwriting requirements, which may differ from those imposed by the FHA.  Summit is a private mortgage lender authorized as an approved FHA direct seller servicer. This communication is not intended to indicate FHA endorsement or approval of any loan program.

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