How do FHA Loans Work?
The Federal Housing Association (FHA) was created as part of the National Housing Act of 1934. It was designed to regulate the interest rate and terms of the mortgages that it insured. Its goal is to make it easier for Americans to qualify for a mortgage.
How FHA Loans Work?
The FHA does not actually make or guarantee loans. The FHA insures loans, decreasing the risk to the lender of default, allowing lenders to accept a wider range of credit scores and lower down payments. In fact, in some cases your down payment may be as low as 3%! If you are a first time homebuyer, or you have less than perfect credit, an FHA Loan is an option to help you refinance, or purchase your dream house.
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FHA Loan Benefits May Include:
- Down payments as low as 3%
- Low interest rates
- Flexible repayment terms
- Mortgage insurance included in the loan
- Non-occupant co-buyer
FHA Loan Requirements Are:
- Your credit score can be as low as 530
- Your property must be your primary residence
- Your Debt-to-Income (DTI) ratio can be as high as 31%
- Only 2 years of documented employment required
What is an FHA Streamline Refinance?
This program is designed to help homeowners take advantage of today’s historically low interest rates and reduce their monthly mortgage payments by refinancing their FHA mortgage. The process is “streamlined” so there is no appraisal or credit check, however, there must be a history of on-time payments. In place of an appraisal, the FHA allows you to use your original purchase price as your home’s current value, regardless of what it is worth today. This is a great way to reduce your monthly mortgage payments and save money.