There are many types of loans, each designed for a specific kind of borrower and financial situation. No two programs are set up exactly alike, and each has its own benefits and requirements.
One of the most common loan types available is the FHA loan.
FHA stands for Federal Housing Administration. This loan is named after the government agency that backs the product. The FHA is the largest insurer of residential mortgages in the world.
One reason FHA loans are so popular, especially with first time homeowners, is the low down payment requirement of just 3.5%.
Having just 3.5% down on a loan can be a risk for lenders, however, so the FHA requires the borrower to pay 1.75% mortgage insurance upfront as well as monthly mortgage insurance premiums.
These costs are based on the length of the loan and on how much you owe compared to your home's value, a figure known as loan-to-value ratio or LTV.
As with any loan product, FHA loans come with their own borrower qualifications and requirements. A few of those requirements are as follows:
With so many loan types and requirements available, it's difficult to know which type of loan is suitable for your finances and future plans. A good Loan Officer will listen to your needs, evaluate your specific situation, educate you on different loan products, and help you select the right loan for you.