It may well be the case that you are already familiar with the concept of an FHA loan and are looking for reassurance that you have chosen the best course of action for yourself and your situation.

Conversely, you may have never even heard of an FHA loan before. Either way, if you are looking to take out money against, or for, a new property to buy, then continue reading to learn how an FHA loan can change your life.

FHA Loans: A Summary

In essence, an FHA (Federal Housing Administration) loan is a mortgage that is insured by the FHA and backed by the government.

Typically, those people who have a lower credit rating, or else cannot afford a particularly substantial down payment when purchasing a new home, tend to opt for an FHA loan as they are usually easier to come by. 

The Numerous Advantages of Choosing an FHA Loan

There are plenty of benefits to choosing to take out an FHA loan and you only need to take a look at the impressive FHA loans rates from renowned and established lenders to know that an FHA is much more lucrative than other types of loans. 

Such benefits include, but are certainly in no way limited to, the following:

  • Higher leniency towards gift funds
  • Much easier qualifications in terms of previous credit 
  • Lower interest rates than conventional mortgages
  • Available financing for one, two, three and four-unit buildings
  • Minimum closing costs
  • Lower required down payments
  • Quicker to qualify if your credit score is negative
  • Cheaper insurance options 

How You Qualify for an FHA Loan

Just as with any other type of loan, there are certain eligibility requirements for an FHA and it would be helpful for you to be aware of each one before you go ahead with your application. This will help you to avoid any confusion. 

If you have ever declared bankruptcy, you need to wait at least a year before applying, or if you have experienced foreclosure, you should wait three years. You also need to prove to have a back-end ratio of debt of under forty-three percent of your overall monthly income and a front-end ratio of debt of no more than thirty-one percent of your monthly income. 

What You Can Do with an FHA Loan

There are so many different uses for an FHA loan that it would be impossible to include each one in this article, but it would be worth noting that many people, even those who have been successful with an FHA application, are not aware of all the possibilities.

FHA loans can be used for mobile homes, for mortgages on multi-unit homes with no more than four separate units and can also be applied to an existing FHA loan too. Other ways to utilize your new FHA loan include converting the equity of your home into cash, using a reverse mortgage, using the money for home improvements, and also repairing or replacing a home after being damaged due to a natural disaster.