FHA Loans

    Many new home buyers are not aware of the differences between the types of home loans that are available to them as they begin the process of looking to finance their new home.  This is troubling because a home purchase can be the largest investment for most families and it is important to be as informed as possible about all of your options before making a purchase.  While you consider the advantages of each type of loan keep in mind the costs of mortgage interest rates on the loan.

    In the broadest terms, there are three common types of loans and they are Conventional, FHA, and VA.  Today we are talking about the FHA from the Federal Housing Administration (FHA) which is part of the US Department of Housing and Urban Development (HUD).  These FHA Loans are popular in Columbus Real Estate because they offer home buyers low down payments, low closing costs, and an easy process for credit qualification.

    The down payment on an FHA Loan can be as low as 3.5% of the sales price of the home.  So for a house with a purchase price of $193,000 the down payment would be $6,755.  When compared with a Conventional Loan which can be as high as 20% this represents a significantly lower amount of cash due at closing.  There are however additional fee’s that need to be taken into account with the FHA Loan.  The first of which is the Up-Front Mortgage Insurance Premium (UFMIP) at 1.75% or in this example $3,259 and a Monthly Mortgage Insurance Premium of 0.85% or in this case $131.92 a month.

    Another advantage of the FHA Loan is for those home buyers who are looking to purchase a home that needs repairs but does not have the money to do the repairs after moving into the new home.  The 203k Loan, a highly specialized FHA Loan offered by a few select lenders, will allow the homeowner to borrow money for the home and home repairs.  Even options for energy improvements, manufactured/mobile homes, and reverse mortgages all have an option through FHA.

    Try not to worry about the numbers and the specifics.  The only thing you need to remember is that there is an option called the FHA Loan for home buyers who do not have enough money for the conventional loan down payment at closing and they should talk with their Realtor to find a local lender who can help them find the best lending to meet their needs.

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