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FHA loans were created back in the 1930’s to promote home ownership. These loans are preferred by first-time home buyers, being considered far superior to conventional loans. FHA insures lenders against financial loss in case the borrower defaults on the loan. Back by these guarantees, lenders can approve many low to moderate income borrowers. Borrowers can qualify for an FHA loan with a down payment as little as 3.5% and a credit score of 580 or higher. The borrower’s credit score can be between 500 – 579 with a 10% down payment. Still, you should acknowledge that the lower the credit score, the higher the interest borrowers will receive. FHA loans are used strictly for owner-occupied homes. This means that you will live in the home you will be buying. The loan terms do not apply to second homes or rentals. You can buy a single-family home, as well as a duplex, triplex or fourplex, or any multi-unit housing structure, as long as you live in one of the units. The loan is also available for manufactured homes or for rehabbing a home.

The main benefits of a FHA loan are pretty attractive:

  • Low down payment. You can get a FHA loan with a down payment as low as 3.5%. This is very small, in comparison with other loan payments. But if you can make a larger down payment, we recommend you to do it.
  • You can use gifts, like valuable works of art or electronics, for down payments. Also, you can use them for closing costs. Sellers can also pay as much as 6% of the loan towards the borrower’s closing costs.
  • There is no prepayment penalty, a really beneficial factor for subprime borrowers.
  • It is assumable. A buyer can assume your loan, benefiting from lower interest costs and possible low-interest rates.
  • It is available to buyers that have recently come out of bankruptcy. You can qualify for FHA after you have gone through 2 or 3 years of financial hardship.
  • It can also be used for paying for home improvement, through FHA203k programs.

If you need to understand more about FHA loans, our mortgage specialists will explain the whole process to you. Mortgage Brokers California will offer you a FREE CONSULTATION on how to get the perfect FHA loan. Call us now (323) 692-1080.