FHA Mortgage

FHA mortgage is a type of mortgage loan that is insured by the Federal Housing Administration. Originally, it was designed to help low income families own homes. One unique thing with this type of mortgage is that it is not affected by your past credit score. As long as you are able to raise the down payment, you qualify for a loan. The down payment for FHA mortgage is lower than that of regular mortgage, usually not more than 3%. This is an affordable rate compared to regular mortgage, which requires you to have at least 10% down payment. You end up paying less because the FHA pays the mortgage insurance. Additionally, lenders are more likely to give you the loan because they can turn to the FHA for a refund in case you default.

Benefits

There are many benefits of taking a FHA Mortgage. The greatest advantage which is also mentioned above is the reduced down payment. This means you require less cash-at-hand to purchase a house than someone applying for a regular mortgage. The second advantage is that the regulations are not as restrictive as in other loans. You can still get a mortgage even with a poor credit score. Thirdly, there are no prepayment penalties. These are charges imposed when someone pays off the loan earlier than the set date. In other loans, if you pay off earlier than scheduled, you get penalized. This makes the FHA mortgage quite flexible in that you can pay it off whenever you get some cash.

The FHA can help you in paying the closing costs, which usually range between 2 and 3%. These costs are the accumulation of attorney’s fees, title search and title insurance. The FHA takes care of private mortgage insurance, so that’s another expense taken care of. You also pay a lesser amount of money for loan origination. This is the amount lenders charge for loan documentation. In the case of FHA mortgage, they are restricted to charge a maximum of 1% for this, which is quite fair.

There is no strict schedule for paying the premium. You can pay your premiums alongside the monthly repayment.

Other terms that apply

You must still be able to afford the monthly repayment amounts. This is something the lender will confirm before they can grant you the loan. However, the total housing cost including the principal, property tax, interest and insurance, should not exceed 29% of your monthly income (gross). If your credit record is not good, you will still qualify for the loan but you will be required to make a higher down payment, usually up to 10%.

Compare the loan offerings with different FHA-approved lenders before settling for a particular lender. The maximum amount a borrower can receive varies from state to state. Some will give higher amounts than others, depending on the jurisdiction. The qualifications for the loan also vary. In some counties or states, they have specific income requirements which you must fit into to qualify. You need to confirm this with your lender.

FHA mortgage terms do change from time to time. It is therefore advisable to carry out a search if you are considering taking such a loan, to see whether the down payment, seller concessions or insurance premium rates have changed before applying for the FHA mortgage.

A Federal Housing Administration (FHA)-insured loan may be a good option for you if

you're a first-time homebuyer
you do not have a lot of money to put down on a house or
you are looking to have a low stable monthly payment

An FHA loan is also an ideal loan for a borrower without perfect credit. Please speak with a RHMC sales person to see if this program is right for you.

RHMC combines the expertise and comprehensive array of mortgage products offered by large national banks with a culture that prioritizes unparalleled personal service. We are large enough to offer any product our clients could imagine, yet small enough to maintain the personal touch our clients expect.

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