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FHA Loans for First-Time Home Buyers
Buying a house can be a challenge for first-time home buyers. Lending companies such as Nations Lending Services can offer FHA loans to homebuyers who have a lower credit score or who cannot pay a high down payment. Those who do not believe they can afford a home may qualify for an FHA loan.
FHA loans are loans insured by the Federal Housing Administration. This means a home loan comes with mortgage insurance from the U.S. federal government that will protect the lender from losing money in case the borrower defaults on the loan. These loans can be used for both single family and multi-family homes in the United States and U.S. territories. The amount and limits on these loans can vary based on state, county, and the type of housing.
FHA loans are designed to allow first-time home buyers and those in lower income brackets to mortgage a home. Lenders can usually offer FHA loans to many home buyers at good interest rates. To qualify for an FHA loan, a borrower must be a legal resident of the U.S. and have a steady employment history. They may need a credit score of at least 500 and have at least ten percent of the down payment. If a borrower has a higher credit score, the down payment may be lower. There are additional requirements that vary from state to state. Net branching companies or reputable lending companies such as Nations Lending Services can help you determine if you qualify for an FHA loan.
There are many benefits to FHA loans. They are available more first-time home buyers because of lower credit score requirements and lower down payments. FHA loans also tend to have low interest rates. As they have mortgage insurance, lenders have more confidence in lending money to the borrower. The limits for a FHA loan tend to be high, especially for a first-time home buyer, so you have many options when choosing a house.
There are some key terms associated with FHA loans. Mortgage insurance is a type of insurance that can pay back a lender if the borrower does not pay back their loan. Premiums on this insurance must be paid for the duration of the mortgage term or 11 years depending on the contract agreement. Annual mortgage insurance premium, or annual MIP, is a monthly fee to pay for the mortgage insurance. Upfront mortgage insurance premiums, or UFMIP, is an insurance premium charged only once which equals 1.75% of the loan, no matter the credit score or the amount of the down payment. LTV ratios, or loan-to-value ratios, is the ratio between the amount of the loan and the cost of the home. The closer the cost of the loan is to the cost of the home can mean less time to pay back mortgage insurance for that loan.
To begin seeking an FHA loan, you must contact a lender who has been approved by the Federal Housing Authority to give FHA loans, such as Nations Lending Services. The lender can tell you if you are eligible for an FHA loan and give you a loan quote.