FHA is a mortgage where private mortgage insurance is subsidized by the Federal government. Most major mortgage companies offer the program. Although it is commonly used by first time buyers, it is not limited to them. This blog offers MA FHA Mortgage Overview and pre-approval guidance to help you decide whether it is a mortgage that you should consider.
Benefits Of FHA Loans
There are several important benefits of FHA loans. The minimum down payment for FHA mortgages is 3 percent, which aids buyers who do not have a lot of funds saved. They also allow borrowers to use gift money for the down payment and closing fees. An additional benefit is the simplified refinancing process. It allows a refinance to a lower payment without needing a new appraisal, which is helpful if loan rates and home values both drop. The mortgages may also be assumed, meaning that it may be transferred to a borrower (if they qualify). This can help if interest rates are high. Finally, FHA does not penalize buyers for FICO scores. Although home buyers must still have satisfactory credit, higher interest rates do not result from lower scores.
Disadvantages Of FHA Financing
There are disadvantages of FHA financing to note. FHA mortgage insurance (MI) is often more than a conventional loan. There is an up-front fee at closing and a repeating fee due each month until the loan reaches 80 percent of the purchase price or current appraised value (borrowers must request the removal of PMI or wait for the legally required lower threshold for it to be automatically removed). For condo purchases, the complex must satisfy specific criteria such as minimum reserve funds and sufficient owner occupancy percentages. Most converted duplexes may be difficult to get approved. Single family real estate must also meet certain requirements geared towards safety.
FHA Pre-approval Guidance
Prior to applying for a pre-approval, pull your credit score and correct any mistakes. Also gather important financial documentation such as bank accounts, tax forms from past years, recent pay stubs, and investment account statements. Underwtiters will routinely ask for a copy of these items. Consult with a loan officer to obtain potential monthly payments (based on a specific purchase price and your credit qualifications) and closing fees prior to advancing too far in the process.
MA FHA Mortgage Overview
FHA makes buying a home possible for certain buyers who may otherwise not qualify for financing. It may also make refinancing or listing a home less complicated if rates dramatically change. However, it does have higher fees and property requirements, so not every buyer is able to or may wish to select an FHA loan. Consult with an FHA loan professional to better evaluate this program.