3 Reasons People Choose FHA Loans
There are a lot of different types of loan packages you can choose from if you need a loan to purchase a home, but FHA loans tend to be one of the most popular option for buyers. If you do not know a lot about loan types and are wondering why people choose these loans over other types, here are the top three reasons you should know about as you decide what type of loan to apply for.
They Have Low Down-Payment Requirements
One of the challenges many people face when trying to buy a home is coming up with enough money to put down on the house. Without a lot of cash to put down on a house, it can be hard to get a loan. The benefit people find in FHA loans is the low down-payment requirements. Many people are able to purchase homes by putting just 3.5% down. This means that if you are buying a house for $150,000, you would need just $5,250 for the down payment. If you chose another type of loan, you might need 20% down, which would amount to a $30,000 down payment. As you can see, there is a big difference in these amounts, and that is one of the top reasons people like FHA loans.
They Do Not Require Great Credit Scores
The second reason people also turn to FHA loans is due to the lenient credit score requirements. Some loan types are only available to people with great credit, and this limits who can apply for them. With an FHA loan, though, you do not need great credit, and this is primarily because the loans are backed by the Federal Housing Administration. Because of this, lenders have fewer risks when offering the loans and are willing to issue them to people with less than great credit. As long as your credit score is at least 580, you should be able to qualify for an FHA loan.
They Offer Competitive Interest Rates
The other thing to realize is that these loans offer competitive interest rates, which means you will not instantly have a high interest rate just because you are choosing an FHA loan. Instead, you might be able to get the same interest rate on an FHA loan that you would on any other type of loan.
These are the top three reasons many people turn to FHA loans when they are buying homes. If you feel that this would be a good fit for your situation, contact a lender that offers FHA loans to learn more about the process of getting preapproved for a loan.