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FHA Loans

The loan most people have heard of is FHA. FHA is short for the Federal Housing Administration. It’s a department within Housing and Urban Development (HUD) and is run by the Federal Government. FHA is geared toward first time buyers however; you do not need to be a first time buyer to utilize this loan. There are several benefits to FHA over other forms of financing.

Down Payment

First, it has a reduced down payment compared to conventional financing. FHA minimum down payment is 3.5% of the purchase price now as opposed to the old requirement of 2.25%. Additionally, these funds do not need to be the borrowers own funds. Borrowers are allowed to get money for a down payment from a gift from a relative, grants, employer, or a 401k loan.

Minimum Score

Although FHA does not technically have a required minimum credit score, all loan investors and servicers have a minimum score of 580. The industry often bases the minimum credit score on an Automated Underwriting System feedback report to determine acceptable credit scores.

Rates

Yes, rates do tend to be a bit more aggressive with FHA as compared to Conventional Financing which is very sensitive to credit scores and higher loan-to-value loans. FHA is the best financing available for you both. Conventional interest rates would be quite a bit higher depending on scores and would require at least 3% down payment (620 required) or 20% down payment.

Easier credit qualifying, lower down payments and lower monthly payments all make FHA an excellent choice for first time buyers!