FHA Loan Benefits - Capstone Direct

One of the most common mortgage loans for first-time home buyers are FHA loans. Insured by the Federal Housing Administration, these loans are popular for many reasons, and one of those reasons is the low down payment that is needed on a property.

Those who are looking to purchase a home and forgo renting are often encouraged to consider this type of loan to save more money up front without compromising on the type of property that is purchased. When considering a home loan, there are some very nice benefits to FHA loans to keep in mind.

Low Down Payments

Instead of saving 20 percent for your first home, FHA loans only require 3.5 percent of a down payment. This makes it easier to purchase a home sooner rather than wait several years until you’re able to afford to move in.

The debt-to-income ratio with FHA loans allows borrowers to have 56 percent or less while conventional loans only allow buyers to have 45 percent or less of their income to qualify.

Most People Qualify

As the economy continues to recover from a major recession, lenders are more hesitant when it comes to approving loans to various borrowers. They’re now stricter on credit scores and the amount of money that is needed to put down on a home. More people with low incomes qualify for FHA loans due to their flexibility.

Lenient Underwriting Requirements

FHA loans have underwriting requirements that are less stringent than conventional loans, making it one of a buyer’s first options when they’re looking at what they qualify for. Buyers can have a lower salary with a shorter work history and can still be approved for an FHA loan.

Built-in Closing Costs

One of the main concerns for first-time home buyers with limited funds is having to pay for closing costs on top of the down payment of a new property. This can cost two to three percent of the home when going through a conventional loan. One of the main FHA loan advantages is that the closing costs can often be included in the mortgage to ensure that the buyers are able to afford it instead of paying it all up front.

Cash-out Refinancing

FHA loans also offer cash-out refinancing when the borrower needs additional money for college or even to make improvements on the property to upgrade the home. This offers more flexibility for the buyers with their finances.

If you’re thinking about an FHA loan, talk to Capstone Direct for more info!